Index IQ launched IQ Global Oil Small Cap ETF (IOIL) last Thursday (5/5/11), the first ETF to target small cap stocks in the global oil industry. The underlying index defines small caps as stocks in the bottom 10% of the entire oil industry’s market capitalization. The sub-sector breakdown shows Refining & Marketing at 40.5%, Exploration & Production 36.9%, and Equipment, Services & Drilling 22.6%.
The fund’s 61 holdings are weighted by float-adjusted market capitalization. While no stock is supposed to exceed a 10% allocation at the quarterly rebalancing, presently no holdings need to be capped. The largest position is Sunoco Inc (SUN) at 6.2%, followed by Oceaneering International Inc (OII) 5.3%, Core Laboratories (CLB) 5.2%, Tesoro Corp (TSO) 4.5%, Petrominerales Ltd (PMGLF) 4.3%, and Alliance Oil Company Ltd (ALLZF) 3.9%.
The IOIL portfolio currently spans 14 countries, including both developed and emerging markets. I was somewhat surprised to see Thailand with the third largest allocation but Russia and Mexico not represented at all. My guess is that this reflects the large size of oil-related companies in those places. The rest of the list was no surprise with the U.S. at 45.1%, Canada 11.7%, Thailand 7.5%, Colombia 4.3%, Japan 4.0%, Sweden 3.9%, U.K. 3.9%, Finland 3.0%, and six others combining for 13.5%.
The only other small-cap energy ETF is PowerShares S&P Small Cap Energy (PSCE), but its geographic mandate is narrower. PSCE holds only stocks that are part of the domestically-oriented S&P SmallCap 600 Index.
All in all, IOIL is well-differentiated from the dozens of other energy ETFs and provides a viable new alternative. The fund’s initial expense ratio is 0.75%. Additional information can be found in the press release (pdf), overview page, fact sheet (pdf), and prospectus (pdf).