While growth prospects in the developed world continue to disappoint, many emerging and frontier countries have picked up the slack and are now surging ahead. These growing economies, buoyed by a rising middle class and surging populations, have perked many investors’ interest in recent months. In order to access this market, most investors target the BRIC economies or other large emerging countries such as Indonesia but a number of ETF issuers have stepped up to the plate to offer investors exposure to new and previously untapped markets in countries ranging from Peru to Poland. In continuing this trend, iShares appears close to launching a new Egypt fund of its own, the iShares MSCI Egypt Capped Investable Market Index Fund (EGYP).
According to the filing, the fund will track the MSCI Egypt Investable Market Index which is a free-float adjusted market capitalization weighted index designed to measure the performance of equity securities in the top 99% by market capitalization of equity securities listed on stock exchanges in Egypt. The Underlying Index is a customized variation of the MSCI Egypt Investable Market Index, and is designed to take into account the investment diversification requirements applicable to regulated investment companies (“RICs”) pursuant to Subchapter M of the United States Internal Revenue Code of 1986, as amended. As of last year, the underlying index had 41 constituents and its three largest industries by component weighting were financials, industrials and telecommunication services.
iShares: Continuing Its War On Van Eck
Currently, there is only one ETF focusing exclusively on the Egyptian market, the Market Vectors Egypt Index Fund (EGPT). This fund launched earlier this year in February and tracks the Market Vectors Egypt Index which provides exposure to publicly traded companies that are domiciled and primarily listed on an exchange in Egypt or that generate at least 50% of their revenues in Egypt. While the fund has gained 12.5% over the past 13 weeks, it has not managed to attract significant investor interest and currently has under $10 million in total assets under management. Nevertheless, iShares appears to be on the cusp of entering the space in order to directly compete with an Egyptian ETF of its own.
This continues the recent trend of iShares launching international ETFs which compete directly with more established funds from Van Eck. In the last few months, three of Van Eck’s most popular funds targeting emerging markets including ones tracking the Indonesian, Polish, and small-cap Brazilian markets now have new competitors from iShares. While these new funds from the ETF giant are not exactly identical to the offerings from Van Eck, there is a lot of overlap and it is not unreasonable to assume that at least some of the new asset inflows that would have gone to Van Eck are now going to iShares. While it remains unclear what iShares has against the Van Eck family and the rest of the New York-based firm, it appears likely that competition will continue to be fierce in the increasingly important ETF world [see all the ETFs that offer exposure to Egypt by using our new Country Exposure Tool].
Disclosure: No positions at time of writing.
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