Index Universe's Weekly ETF Review

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Includes: CWI, DBA, FVD, INP
by: IndexUniverse

Here's a list of new ETF listings and filings announced in the last week:

Listings

Seeing The World
One-stop shopping. Or, at least, two-stop shopping. That’s the idea behind the newly launch global (ex-U.S.) exchange-traded fund [ETF] from State Street Global Advisors [SSgA].

The new SPDR MSCI ACWI ex-U.S. ETF (NYSEARCA:CWI) is the first ETF to offer U.S. investors broad-based exposure to both developed and emerging international markets in one package. As the name suggests, the fund tracks the MSCI All World Country (ex-U.S.) Index includes the performance of substantially all investable markets outside the U.S. In contrast, most other international ETFs track either developed or emerging markets.

With the launch of the new fund, investors can now own the world in two clicks: one to buy a broad-based U.S. fund, and one to buy CWI. The fund charges 35 basis points in annual expenses, and trades on the American Stock Exchange.

The prospectus is available here (pdf file).

IndexUniverse.com’s initial coverage is available here.

New Filings

Vanguard Bonds With Investors
The fixed-income filings continue to come hot and heavy. The latest news comes from Vanguard, which filed papers with the Securities and Exchange Commission [SEC] for the right to launch four new ETFs. The funds, benchmarks and expense ratios are:

vanguard bond etfs

The SEC filing is available here.

IndexUniverse.com’s full coverage is available here.

As with all Vanguard ETFs, the new bond ETFs are share classes of existing funds. The 11 basis point expense ratios [ER] are significantly lower than the ERs for the traditional “Investor” shares of the original mutual funds (available to everyone), and are in-line with the Admiral shares (available to investors with more than $50,000 to invest). More importantly, the ERs are also significantly lower than the ERs for competing bond ETFs from iShares, which run from 15 to 20 basis points. One hopes that the new Vanguard filings will encourage BGI to lower its fees, but that has decidedly not been the case in other asset classes.

iShares Junkies
Speaking of fixed-income ETFs, Barclays Global Investors [BGI] filed papers with the Securities and Exchange Commission (SEC) for the right to launch a new high-yield (or “junk bond”) ETF. The iShares iBOXX Liquid High Yield Index ETF will track a liquidity-ranked index of fifty dollar-denominated high-yield bonds.

Fees and the ticker symbol are not yet available.

The fund will be the first high-yield ETF, looping in a hot area of the market with the surging interest in all-things-ETF. Some market observers, however, question whether now is a good time to own junk bonds, as spreads over investment-grade securities are near historical lows. In other words, the markets aren’t compensating investors very highly for taking on the added risk of the high-yield bonds. With a concentrated fund holding just fifty names, investors will have to carefully gauge the trade-off between higher yields and higher risks.

The SEC filing is available here.

IndexUniverse.com’s full coverage is available here.

IndexIQ: Indexing Intangibles
In one of the more unusual ETF filings in recent months (and that’s saying something), a group called IndexIQ has filed for 20 new ETFs that try to take indexing in a whole new direction. Rather than being based on traditional market factors like market capitalization, or even more specific targets like “growth,” “value,” or dividend payouts, the IndexIQ ETFs will track indexes based on what might be called "intangibles”: measures like "Innovation," Power" and "Most Productive."

The funds included in the filing are:

IndexIQ Most Innovative Companies All Cap Index
IndexIQ Most Innovative Companies Small Cap Index
IndexIQ Most Powerful Companies Index
IndexIQ Most Powerful Companies Large Cap Index
IndexIQ Fastest Growing Companies All Cap Index
IndexIQ Fastest Growing Large Cap Companies Index
IndexIQ Best Operating Companies All Cap Index
IndexIQ Best Operating Companies Large Cap Index
IndexIQ Most Productive Companies All Cap Index
IndexIQ Most Productive Companies Large Cap Index
IndexIQ Most Elite Workforces All Cap Index
IndexIQ Most Elite Workforces Large Cap Index
IndexIQ Best Corporate Governance All Cap Index
IndexIQ Best Corporate Governance Large Cap Index
IndexIQ Competitive Momentum Leaders All Cap Index
IndexIQ Competitive Momentum Leaders Large Cap Index
IndexIQ Customer Loyalty Leaders All Cap Index
IndexIQ Customer Loyalty Leaders Large Cap Index
IndexIQ Most Sustainable Companies All Cap Index
IndexIQ Most Sustainable Companies Large Cap Index

The prospectus filing is available here.

IndexIQ says these intangible attributes are “too often are overlooked in equity analysis, but represent many of the strongest drivers of corporate growth and equity returns.” They have developed quantitative measures that they believe isolate these ephemeral concepts. The idea is similar to the “intellectual property” indexes developed by Ocean Tomo (one of which serves as the basis for an ETF from Claymore).

So how does IndexIQ measure these intangibles? The filing doesn’t reveal much in the way of methodology. As the launch approaches, however, IndexUniverse.com will take a closer look at how the company plans to measure things like “Customer Loyalty” and “Elite Workforces.”

There is no word yet on expense ratios or where the new ETFs will be listed.

Recently Launched ETFs: Weekly Asset Growth
(November 2006 - January 2007 Launches)

Two ETFs stood out from the pack this week on the new assets front. Leading the charge for the second week in a row was the iPath India ETN (NYSEARCA:INP), with pulled in over $17 million, brining net assets to more than $17 million. And as predicted last week, the PowerShares DB Agricultural (NYSE:DBA) fund took off, gathering over $14 million, even as the six other PowerShares commodity sector funds pulled in just $0.6 million collectively. As they say: corn is the new gold...

One other noteworthy trend that emerges from the weekly asset numbers is the continued hemorrhaging of assets from the First Trust Value Line Dividend Index Fund (NYSEARCA:FVD). That fund converted from a closed-end fund to an ETF at the beginning of January. The closed-end fund had traded at a steep discount to its net asset value [NAV] for some time, and converting the fund was seen as a very effective way to close that deficit.

But while the move has been good news for investors, it has been decidedly bad news for First Trust. Following the conversion, the fund held more than $450 million in assets; today, it’s down to $374 million, and is loosing money at a rate of $30+ million per week. Investors are clearly taking advantage of the closing of the discount to opt out of the fund. Eventually, First Trust may reverse that trend, but so far, there’s no sign of that happening.