Invest With An Edge

BlackRock Floods ETF Market In Early 2012

BlackRock (BLK) continues flooding the market with new ETF introductions this year. Following a dozen January introductions, the firm released 14 more in early February. All 26 provide international or global exposure, with many aimed squarely at competitive products. BlackRock also hopes its iShares brand will succeed where others have failed by rolling out funds that replace other firm’s closures.

The February launches include five global commodity producer funds, two India funds, two All Country Asia ETFs, and five targeting emerging market segments. Once again, BlackRock chose to divide the listings between the three major US exchanges: NYSE Arca, Nasdaq, and BATS.

The five new global commodity producer ETFs all have 0.39% expense ratios.

  1. iShares MSCI Global Agriculture Producers Fund (VEGI) (VEGI overview) tracks a 168-stock market capitalization free float-adjusted index. Industry allocations include Fertilizer & Ag Chemicals 53%, Ag Products 23%, Machinery 15%, and Packaged Foods 9%. Country representation includes U.S. 42%, Canada 14%, Switzerland 8%, Malaysia 4%, and Japan 4%.
  2. iShares MSCI Global Energy Producers Fund (FILL) (FILL overview) tracks a market capitalization free float-adjusted index of 313 stocks. Industry allocations include Integrated Oil & Gas 66%, Exploration & Production 26%, Refining 4%, and Coal 3%. Country representation includes U.S. 46%, U.K. 19%, Canada 11%, France 4%, and Brazil 4%.
  3. iShares MSCI Global Select Metals & Mining Producers Fund (PICK) (PICK overview) tracks a market capitalization free float-adjusted index of 363 stocks. Industry allocations include Diversified Metals & Mining 62%, Steel 33%, Precious Metals 3%, and Aluminum 3%. Country representation includes U.K. 25%, Australia 19%, U.S. 11%, Brazil 10%, and Japan 6%.
  4. iShares MSCI Global Gold Miners Fund (RING) (RING overview) tracks an MSCI 25/50 Index (pdf) of 42 stocks that derive the majority of their revenue from gold mining. Country allocations include Canada 56%, South Africa 13%, U.S. 12%, Australia 11%, and others 9%.
  5. iShares MSCI Global Silver Miners Fund (SLVP) (SLVP overview) tracks an MSCI 25/50 Index of 30 stocks that derive the majority of their revenue from silver mining. Country allocations include Canada 58%, Peru 12%, U.S. 10%, Mexico 9%, U.K. 9%, and Hong Kong 2%.

Opinion/Analysis: The above were listed on NYSE 2/2/2012. While they follow an “All Country” approach including both developed and emerging markets, BlackRock chose not to include the term in their names as it does for other ETFs, instead describing them as “global.” The group appears to be a direct attack on competitors Market Vectors Agribusiness (MOO), Global X Oil Equities ETF (XOIL), SPDR S&P Metals & Mining (XME), Market Vectors Gold Miners (GDX), and Global X Silver Miners (SIL).

The two new single-country India funds are:

  1. iShares MSCI India Index Fund (INDA) (INDA overview) launched 2/3/12 on BATS with a 0.65% expense ratio. It tracks a free float-adjusted market capitalization index of 72 stocks representing the top 85% market capitalization of Indian stocks. Sector representation includes Financials 25%, Technology 19%, Energy 12%, Materials 9%, and Consumer Staples 9%.
  2. iShares MSCI India Small Cap Index Fund (SMIN) (SMIN overview) launched 2/9/12 on BATS with a 0.74% expense ratio. It tracks a free float-adjusted market capitalization index of 236 stocks representing the bottom 14% market capitalization of Indian stocks. Sector representation includes Financials 22%, Consumer Discretionary 18%, Industrials 16%, Materials 9%, and Health Care 9%.

Opinion/Analysis: These two new ETFs broke with tradition by placing their primary listing on BATS. The ETF marketplace was without an iShares branded India fund for many years until the introduction of iShares S&P India Nifty 50 (INDY) in 2009. Now we have both large and small cap products tracking MSCI indexes, and challenging the more established products like the iPath MSCI India Index ETN (INP) and Market Vectors India Small Cap (SCIF).

The two new All Country Asia ETFs are:

  1. iShares MSCI All Country Asia ex-Japan Small Cap Index Fund (AXJS) (AXJS overview) launched 2/3/12 on Nasdaq with a 0.75% expense ratio. It tracks a free float-adjusted market capitalization index of 1,773 stocks representing the bottom 14% market capitalization of the underlying countries. Top sectors include Consumer Discretionary 19%, Financials 18%, Technology 17%, Industrials 16%, and Materials 12%. Largest country representation includes Taiwan 21%, South Korea 20%, China 17%, Hong Kong 10%, and Singapore 8%.
  2. iShares MSCI All Country Asia Information Technology Index Fund (AAIT) (AAIT overview) launched 2/9/12 on Nasdaq with a 0.69% expense ratio. It tracks a free float-adjusted market capitalization index of 115 stocks. Industry allocations include Semiconductors 33%, Components 13%, Office Electronics 9%, Computer Hardware 9%, and Equipment 8%. Country representation includes Japan 39%, Taiwan 28%, South Korea 22%, and others 11%.

Opinion/Analysis: While many iShares ETFs carry the “All Country” designation, these two seem not to fit any current categorization schemes. AXJS is clearly the small cap counterpart to iShares MSCI All Country Asia ex-Japan (AAXJ), and AAIT is the first “All Country Asia” sector fund, but the family seems to stop there.

The five new ETFs targeting various emerging markets segments launched on 2/9/2012 with NYSE listings:

  1. iShares MSCI Emerging Markets Asia Index Fund (EEMA) (EEMA overview) has a 0.49% expense ratio and tracks a free float-adjusted market capitalization index of 543 stocks. Largest sector allocations include Financials 24%, Technology 21%, Consumer Discretionary 10%, Materials 10%, and Energy 9%. Country representation includes China 30%, South Korea 25%, Taiwan 18%, India 10%, and others 15%.
  2. iShares MSCI Emerging Markets Consumer Discretionary Sector Index Fund (EMDI) (EMDI overview) has an expense ratio of 0.69% and tracks a free float-adjusted market capitalization index of 88 stocks. Industry allocations include Automobile Manufacturers 34%, Department Stores 9%, Auto Parts 8%, Cable 7%, and Apparel Retail 6%. Country representation includes South Korea 33%, China 14%, South Africa 13%, Mexico 7%, and Brazil 7%.
  3. iShares MSCI Emerging Markets Energy Sector Capped Index Fund (EMEY) (EMEY overview) also has a 0.69% expense ratio and tracks a free float-adjusted market capitalization index of 49 stocks, capped with a 25/50 methodology (pdf). Industry allocations include Integrated Oil & Gas 59%, Exploration & Production 16%, Refining 12%, and Coal 11%. Country representation includes Russia 27%, China 22%, Brazil 21%, India 6%, and Thailand 5%.
  4. iShares MSCI Emerging Markets Growth Index Fund (EGRW) (EGRW overview) has an expense ratio of 0.49% and tracks a free float-adjusted market capitalization index of 434 stocks representing the 50% of market cap deemed to have the highest “growth” characteristics. Current sector breakdown includes Financials 21%, Technology 19%, Consumer Staples 12%, Consumer Discretionary 12%, and Materials 10%. Largest country representation includes China 18%, South Korea 15%, Brazil 15%, Taiwan 11%, and South Africa 8%.
  5. iShares MSCI Emerging Markets Value Index Fund (EVAL) (EVAL overview) has an expense ratio of 0.49% and tracks a free float-adjusted market capitalization index of 491 stocks representing the 50% of market cap deemed to have the highest “value” characteristics. Current sector breakdown includes Financials 27%, Energy 19%, Materials 17%, Telecom 10%, and Industrials 8%. Largest country representation includes China 18%, Brazil 15%, South Korea 15%, Taiwan 11%, and South Africa 8%.

Opinion/Analysis: EEMA completes the trio of new funds dividing emerging markets into three major regions. Funds for Latin America (EEML) and EMEA (EEME) were introduced in January. The two emerging market sector funds (EMDI and EMEY) seem aimed at competitive offerings from EGShares and its GEMS lineup of emerging market sector funds, of which nine are on ETF Deathwatch. EGRW and EVAL are not the first attempt to separate emerging market securities into “growth” and “value” buckets. However, the existing pair from Global X (EMGX and EMVX) are scheduled to close this week (2/16/2012). BlackRock clearly sees an opportunity where Global X has thrown in the towel.

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.