iShares Plans Several Emerging Market ETFs

September 12, 2011

iShares plans to slice and dice emerging markets, a slew of new filings show.

iShares, the BlackRock unit and the world’s biggest ETF company, filed four separate registration statements with U.S. regulators to market a number of emerging markets ETFs that slice the segment into growth and value strategies, as well as three Asia-focused funds and a sector fund focused on consumer spending.

The six new ETFs amount to iShares’ efforts to further slice and dice the emerging markets segment as investors continue to look outside of the developed economies for prospective investment opportunities especially now, as concerns over Europe’s debt load and slacking U.S. growth mount.

One of the Asian funds is a broad-based ETF, and the other two target India—one broad-based the other focused on small-cap Indian firms, according to separate regulatory filings detailing the funds. Asia is perhaps the most vibrant region in the world economy and, more so than China, many see India with better long-term prospects than China based on younger demographics and richer geography.

The emerging markets consumer ETF marks iShares' attempt to give investors access to growing consumer demand in the emerging markets. Companies such as Emerging Global Advisors have had success with this strategy. The EGShares DJ Emerging Markets Consumer Titans ETF (NYSEArca: ECON) has almost $250 million in assets, and is the New York firm’s single-most successful fund.

Slicing Emerging Markets Into Growth and Value

Both the iShares MSCI Emerging Markets Growth Index Fund and the iShares MSCI Emerging Markets Value Index Fund will track MSCI indexes that pick securities from the broader MSCI Emerging Markets Index, the same index anchoring the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM), according to respective filings.

EEM, which until January of this year was the world’s largest emerging ETF, has about $32 billion in assets. It’s now second only to Vanguard’s MSCI Emerging Markets ETF (NYSEArca: VWO), which boasts $45 billion in assets.

iShares’ new funds would go head-to-head with a pair of Global X ETFs that, while linked to Russell benchmarks, offer the same focus on growth and value stocks.

But neither the Global X Russell Emerging Markets Growth ETF (NYSEArca: EMGX) nor the Global X Russell Emerging Markets Value ETF (NYSEArca: EMVX) has attracted sizable assets. They have each gathered about $2.2 million in assets since their January inception.

MSCI evaluates each security with growth and value factors, looking at forecasted earnings growth rates, book value to price ratios, forward earnings to price ratios and dividend yields in order to determine whether the stock is a growth opportunity or a value name.

Some companies might be included in both portfolios, the company said in the filings.

Both funds span their exposure across some 20 countries, but the growth portfolio hones in on financial, information technology and material companies, while the value mix includes energy, financial and telecommunication service names.


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