WisdomTree, the New York-based ETF issuer, revealed more plans to expand its lineup of exchange traded products with SEC filings for two international ETFs. The proposed funds helped to kick off WisdomTree’s move to the Nasdaq for its own stock (WETF) and look to move the company’s ETF lineup towards the 50 product mark. While expense ratios or ticker symbols were not released for either one of the proposed products, we have highlighted some of the key details from the filing below.
Germany Hedged Equity Fund
According to the recent SEC filing, this proposed fund will track the WisdomTree Germany Hedged Equity Index, which offers investors exposure to German equity markets while at the time offsetting exposure to fluctuations of the value relative to the American currency. The index will only include German securities that have a minimum market cap of at least $1 billion and the underlying securities will be weighted by aggregate dividends.
The fund’s methodology, which strips out exposure to the euro, could make for a good choice for investors who want to hold German companies but believe that the euro will be weakening against the dollar. On the flip side, when the dollar is strengthening against the euro, this proposed fund is likely to underperform a non-hedged counterpart. In terms of underlying holdings, the specifics were not released, but the filing did say that components will consist of companies incorporated and trading in Germany and would be selected from the WisdomTree DEFA Index. Some of the largest German companies in this index include Deutsche Telekom (OTCPK:DTEGF), E.ON (OTCQX:EONGY), and Siemens AG (SI).
Asia Small Cap Fund
This proposed fund looks to track the WisdomTree Asia Small Cap Index, which measures the performance of companies that pay regular cash dividends and are classified as small caps in the region of Asia. The index will include companies that make up the bottom 10% of the market capitalization in the 10 largest countries in emerging Asia that have a minimum market cap of $100 million. Index components will be weighted by aggregate cash dividends paid and no one country will make up more than 25% of the fund.
According to the filing, the nations selected for inclusion in the fund are China, Hong Kong, Taiwan, Malaysia, Thailand, Indonesia, Singapore, Korea, India, and the Philippines. So this proposed fund would include both developed and emerging markets in the Asian region; Hong Kong and Singapore are considered developed economies, while Korea and Taiwan are often considered to have graduated beyond emerging status as well. The proposed fund would be unique in the ETF universe; there isn’t currently a product with a focus on small cap dividend paying companies in the Asia region.
Both funds look to face little in terms of direct competition from existing products, but could see a battle against other funds that are somewhat comparable. For example, the Germany Hedged Equity Product could be partially impacted by the MSCI EAFE Currency-Hedged Equity Fund (DBEF) from Deutsche Bank. The fund puts roughly 10% of its exposure in Germany and is hedged against the euro, among a variety of other global currencies. There are currently two pure play Germany ETFs, the large cap heavy EWG and small cap-focused GERJ.
Meanwhile, on the Asia small cap side, there are currently no ETFs in this particular segment of the market but IndexIQ recently filed for several products that could pose stiff competition to the fund, including the IQ Asia Pacific ex-Japan Small Cap ETF, the IQ Asian Tigers ETF, and the IQ Asian Tigers Small Cap ETF; see more about this filing here.
Disclosure: No positions at time of writing.
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