Fundamental exchange-traded funds [ETFs] pioneer WisdomTree Investments (WSDT.PK) is expanding. That's hardly news in the U.S., but it will be in Latin America.
The New York-based index provider says that its filing with the Comisión Clasificadora de Riesgo, which regulates pension funds in Chile, has been approved. As a result, some 34 WisdomTree ETFs from the WisdomTree Trust are now available for investment by Chilean pension funds.
Currently, WisdomTree estimates the country's pension funds hold about $114 billion in assets.
By comparison, the company's lineup of 39 ETFs has total assets of around $4 billion in the U.S.
"We had a tremendous number of people from Chile who wanted to represent us down there," said Bruce Lavine, WisdomTree's president. "As a country, it has been very much ahead of the curve in terms of pension fund schemes."
Chile has been very aggressive about encouraging its workers to invest for retirement. "That $114 billion is a pretty big number for the size of the country and its GDP," Lavine said.
The country's investors have already warmed to ETFs, he added. "Pension funds have invested in ETFs for years," Lavine said. "Some of the iShares and SPDRs are already registered in Chile."
The pension plans have also recently increased its restrictions on foreign holdings allowed to 40%. "We have all these funds that are packaging up dividend streams from around the world," Lavine said. "So to the extent that pension plans are looking to broadening their exposure to non-Chilean markets, we think this opens up some additional opportunities for pension funds."
The WisdomTree benchmarks first started launching in ETF form in the U.S. in June 2006. The lineup now covers all major market capitalization ranges, both domestically and internationally. But in contrast with traditional indexes, WisdomTree weights its portfolios by its own measures of so-called fundamental value. In most cases, that involves dividend streams and other business-level valuation metrics.
WisdomTree didn't register some of its smaller ETFs in Chile. "They set a threshold of around $20 million in assets in the registration process," Lavine said. "So we left some of our smaller funds out for now."
Those were: WisdomTree International Technology (NYSE: DBT); WisdomTree International Consumer Cyclical (NYSE: DPC); WisdomTree SmallCap Earnings (AMEX: EES); WisdomTree Total Earnings (AMEX: EXT) and WisdomTree Earnings Top 100 (AMEX: EEZ).
"Some of those are bigger now, but at the time we went through the process last year, those were smaller," Lavine said.
He added that ETFs had great success in Mexico. "It has already become a several-billion-dollar market in that country," Lavine said. "So we're going to be looking at that market as well in the future."
Written by Murray Coleman