International Real Estate ETFs Can Be Like Apples and Oranges

June 25, 2008

by Tom Lydon

Two exchange traded funds (ETFs) can sound alike, but pulling back the curtain can often reveal big differences, such as those between two international real estate funds.

The PowerShares FTSE/RAFI International Real Estate Portfolio (PRY ) was born on Dec. 28, 2007, joining the WisdomTree International Real Estate ETF (DRW ) , which launched on June 5, 2007.

Both ETFs offer similar exposure, but have different methodologies in their construction.

Their trading volume alone is vastly different: over a three-month period, PRY traded 1,600 shares per day compared to DRW’s 34,700 shares. DRW holds more assets, too. This is likely a case of the first fund to market being the recipient of the lion’s share of the assets.

Both funds offer exposure for investors who are looking for real estate markets that aren’t in the troubled United States, says Don Dion for Seeking Alpha .

PRY gives international exposure to real estate in developed countries that fulfill criteria such as book value, funds from operations, dividends and sales. DRW uses a numbers-based dividend weighting method and has a 0.58% expense ratio vs. PRY’s 0.75%.

Both ETFs share the same top holding, and the top three countries allocated, but DRW has 192 components, while the largest five holdings make up 28.8% of the fund. PRY has 146 components, with the five largest holdings making up 23.9% of the ETF.

Australia, Hong Kong and Japan make up the top countries represented in each fund, with different percentages given to each country, depending on the fund.

Year-to-date, PRY is down 13.5% while DRW is down 14.2%. Interestingly, some of the domestic real estate ETFs have been doing better year-to-date, although they’re down, too.

When the global real estate market rights itself, other ETFs that can take you abroad are:

• SPDR Dow Jones Wilshire International Real Estate (RWX ). down 14.7% year-to-date
• iShares FTSE EPRA/NAREIT Global Real Estate ex-US Fund (IFGL ). down 18% year-to-date
• iShares S&P World ex-US Property Index Fund (WPS ). down 17.9% year-to-date

S&P Jumps On The Asian Bandwagon

June 19, 2008

by Tom Lydon

Asia has been one of the most popular areas for exchange traded fund (ETF) investors to gain some international exposure. So, why not provide indexes that focus on specific portions of the region?

Standard & Poor’s has launched the S&P Asia Thematic Index Series made up of three new investible indexes for Asian equity markets, based on special investment themes, reports ETF Express .

The Asia Thematic Index Series contains the largest and most liquid companies from China, Hong Kong, Japan, Malaysia, Singapore, South Korea and Taiwan.

The new indexes are:

• S&P Asia Infrastructure Index
• S&P Asia Water Index
• S&P Asia Alternative Energy Index

The infrastructure index holds 30 stocks across three infrastructure clusters: energy, transportation and utilities. The water index has 30 stocks in two water-focused clusters: water utilities and infrastructure. The alternative energy index has 20 stocks involved in the production of energy from alternative sources.

Russia’s Economy and ETF Are the Story for May

June 02, 2008

by Tom Lydon

The top-performing exchange traded fund (ETF) for May was Market Vectors Russia (RSX ). Year-to-date, it’s up 14.7%.

It’s just the latest good news for a country that’s currently enjoying a 10-year economic expansion. Its gross domestic product has soared to $1.7 trillion in 2007, from less than $200 billion in 1999.

Goldman Sachs predicts that Russia’s economy will overtake Britain, France and Germany in the next few decades to become Europe’s largest economy, reports Guy Faulconbridge for Reuters.

But can Russia sidestep its minefields? The country is rife with corruption, prices are soaring and there’s a possibility of political instability in the future. Some Kremlin officials wold also like to diversify the economy beyond its energy exports. On paper, it looks like they’re going in the right direction. Russia has even set a goal for itself of being one of the world’s top five economies by 2020.

Prime Minister Vladimir Putin, for his part, says he will concentrate on economic and social policy to ensure that the macro-economic stability achieved when he was in office remains.

Jeff Benjamin for Investment News says that Russia can be a double-edged sword for investors: big gains coupled with an uncertain fledgling democracy. While RSX is a pure play, for investors who’d rather have broader exposure, there are other options, such as the Claymore/BNY BRIC (EEB ). It contains a 4.9% exposure to Russia, along with larger weightings in Brazil (53.7%), China (19.9%) and Hong Kong (12.4%). Year-to-date, it’s up 2.5%.

Northern Trust Delivers Three More Single-Country ETFs

May 21, 2008

by Tom Lydon

Northern Trust continues apace with its exchange traded fund (ETF) launches with three new launches this week, this time covering China, Belgium and the Netherlands.

The funds are:

SNO’s underlying index covers the H shares, which are shares of companies based in mainland China that are listed on the Hong Kong Stock Exchange, reports Heather Bell for Index Universe. China’s markets are largely closed to foreign investment, and H shares are way for for investors to access the economy. The expense ratio is 0.51%.

Analysts feel that the long-term impact of China’s recent devastating quake should be minimal, and that the country’s rapid economic growth should continue once the damage is repaired. Excluding the loss in terms of future output, Chinese companies have suffered $9.5 billion in damages.

BRU tracks Belgium’s blue-chip index of the 20 largest stocks on the Euronext Brussels exchange, and its expense ratio is 0.47%. Belgium’s economy ministry predicted today that the country’s gross domestic product (GDP) growth will slow to 1.7% this year, reports Antonia Vandevelde for Thomson Financial. The ministry doesn’t expect the figure to grow in 2009, either, but that it does predict that growth will begin again in 2010.

AEX covers Amsterdam’s top 25 blue-chip stocks, and comes with an expense ratio of 0.47%. The economy in the Netherlands depends heavily on foreign trade. There is low unemployment, low inflation and stable industrial relations, according to the CIA World Factbook. After a slowing of the economy in 2005 and 2006, it seems to have righted itself after job growth reached 10-year highs in 2007.

Northern Trust Enters ETF Arena With First ETFs To Track Major Foreign Market Indexes

May 05, 2008

by Tom Lydon

With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.

Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.

We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall, says Peter Ewing, the managing director of Northern Trust’s ETF group.

The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world’s third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).

Our opening salvo is traditional, Ewing says. But the provider isn’t averse to more inventive ETFs and strategies. But for now, We want to stay true to our principles.

Northern Trust’s ETFs, which all have an expense ratio of 0.47%, are:

• NETS S&P/ASX 200 Index Fund (AUS ): Represents Australia
• NETS DAX Index Fund (DAX ): Tracks Germany’s major exchange
• NETS FTSE 100 Index Fund (LDN ): Invests in the largest companies by market cap on the London Stock Exchange
• NETS CAC40 Index Fund (FRC ): Represents France
• NETS Hang Seng Index Fund (HKG ): Represents Hong Kong
• NETS TOPIX Index Fund (TYI ): Represents Japan

At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.

BRIC ETFs Have Many Access Points for Investors