Emerging Markets+High Income+Low Beta=HILO

August 15, 2011 by  
Filed under Commentary, ETF IPOs (New ETFs)

Note:  This fund was renamed EGShares Low Volatility Emerging Markets Dividend ETF (HILO) effective 10/28/11.

EGShares Emerging Markets High Income Low Beta ETF (HILO) came out on August 4, just in time for record global volatility.  The new fund is aimed squarely at dividend-seeking investors who want to move outside developed markets without taking on the full risk of emerging market growth stocks.

HILO is designed to replicate the INDXX Emerging Market High Income Low Beta Index.  The index consists of 30 stocks drawn from a 2500-company, 21-country universe.  Candidates are screened for market capitalization, trading volume, dividend yield, dividend payment consistency, beta, and correlation with local benchmarks.

Presently the index and HILO hold exposure to companies from 11 countries.  The top five are Malaysia with 18.0%, South Africa 17.3%, Brazil 13.4%, China 12.7%, and Thailand 8.9%.  Sector-wise, HILO is heavy on telecommunications, infrastructure and utility stocks – much like dividend ETFs from developed markets.   The top sectors are Wireless Telecom 14.8%, Diversified Telecom 13.9%, Oil, Gas & Consumable Fuels 7.9%, Transportation Infrastructure 6.6%, and Independent Power Producers 6.3%.

Index constituents are weighted by dividend yield with individual positions capped at 5% and country representation limited to five holdings.  HILO has a gross expense ratio of 1.64%, capped at 0.85% until at least July 10, 2012.  The underlying index has a current dividend yield of 5.54% as of the ETF’s launch date.   This suggests the ETF will have an annual yield of nearly 4.7% (with quarterly distributions) after expenses, but that number could change sharply if markets continue swinging.

More information including a press release (pdf), summary pagefact sheet (pdf), and prospectus (pdf) can be found on the EGShares web site.

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.

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