This week Van Eck Global launched the first U.S.-listed ETF providing investors with exposure to the small cap stocks of Germany. Market Vectors Germany Small-Cap ETF (GERJ) intends to track a rules-based, modified market capitalization-weighted, float adjusted index comprised of publicly traded companies that are domiciled and primarily listed in Germany or that generate the majority of their revenues there.
The underlying index from 4asset-management (pdf) targets companies in the lowest 10% of market capitalization, with the largest current holding having a capitalization of about $4.5 billion. There does not appear to be any overlap with the holdings of iShares MSCI Germany (EWG), the only other Germany single-country ETF.
According to Van Eck’s Investment Case for German Small Caps (pdf), Germany has the fourth largest world economy and is the fastest growing economy among the G7 nations. Unlike the U.S., German unemployment is at a 19-year low, business confidence is at a 20-year high, and it did not experience a recent property or credit bubble.
Van Eck caps the expense ratio for GERJ at 0.55%. Current sector allocation is Industrials 34.5%, Technology 15.8%, Consumer Discretionary 14.9%, Financials 12.5%, Health Care 9.7%, Materials 9.5%, Telecommunications 2.2%, Staples 0.5%, Energy 0.2%, and Utilities 0.2%.
GERJ presently consists of 93 stocks that are, for the most part, probably unfamiliar names to the average U.S. investor. Top holdings include Tognum AG 4.4%, MTU Aero Engines Holding AG 4.1%, Symrise AG 4.1%, Rheinmetall AG 3.7%, and Wincor Nixdorf AG 3.2%.
Being the first ETF in this space, GERJ has no direct competition. It should provide investors desiring access to German small cap stocks with an excellent vehicle. As mentioned previously, there is no overlap with EWG. Additional information can be found in the press release (pdf), summary page, fact sheet (pdf), and prospectus (pdf).
Disclosure covering writer, editor and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.