Three 'ex-ETF' Ideas

Given some of the ETFs that have been discontinued, and others with low assets, it will take some innovative and useful new ETF products to prosper.

Some proposed ETF ideas of my own, that I am surprised have not made it to the market, include products similar to the idea behind Vanguard's Extended Market Index ETF (VXF), but applied globally to international ETFs. In other words, to have investment vehicles that capture everything other than the largest cap portion of an index.

1) The Developed Markets ex-G7 ETF. 

This ETF would include all the developed country markets but except for the United States, Japan, Germany, the UK, France, Italy and Canada. This is similar to the Asia Pacific ex-Japan funds out there.

At the moment, the above countries comprise the following percentage of some popular broad developed ETFs: iShares MSCI ACWI (ex-US) (ACWX) 55.6%; iShares MSCI (ACWI) 74%; iShares MCSI EAFE Index (EFA) 66.2%; Vanguard Europe Pacific (VEA) 66.3%.

Therefore, not much is left over for the remaining 20 or so developed countries. At the moment, to gain significant exposure in these markets, you have to buy each of the available country ETFs. This new ETF would allow investors to make significant investments in the non-primary developed markets such as Spain, Australia, Switzerland and others without having to buy each of those individual market ETFs.

2) Europe Developed ex-G7 ETF.

The same idea as above applied to Europe, so that the UK, Germany, France and Italy are excluded.

To give an idea of how much these four comprise at the moment, let’s take a look at some popular European ETFs: Vanguard Europe ETF (VGK) 65.3%;  PowerShares BLDRS Europe 100 ADR Index Fund (ADRU) 67.47%.

Not much room left for Spain, Austria and the rest.

3) Emerging Market ex-BRIC ETF.

Extending this concept to the emerging markets, let’s have an ETF that excludes the usual BRIC (Brazil, Russia, India and China) markets to gain global secondary emerging markets exposure without having to buy regional funds or individual country funds.

At the moment, for example, the above countries comprise the following percentage of some popular emerging market ETFs: iShares MSCI Emerging Markets Income Fund (EEM) 44.27%; Vanguard Emerging Markets (VWO) 44.7%; BLDRS Emerging Markets 50 ADR Index (ADRE) 53.5%.

Again, there is room for a global emerging ETF comprised of other than the BRIC emerging markets.

That’s it for now. I hope to see these ETF products in the pipeline in the near future.

Disclosure: Author holds positions in ADRE and VEA  

Comments

[John C. Lee:]

Why don't you go start them?

2008 Sep 02 03:47 AM

[gordon smith:]

How about some lazy portfolios of ETFs - with 30% or 40% debt/60-70%equity?..or... of funds -using ETFs

2008 Sep 02 10:08 AM

[mouth:]

Short the Korea ETF's

2008 Sep 02 12:54 PM