In a move to quench investors' thirst for growing opportunities
in the emerging markets beyond the BRIC nations, Guggenheim has
filed for a new ASEAN-focused ETF with the SEC.
The proposed fund in focus
As per the
recent SEC filing
, the proposed passively managed ETF will trade under the name of
Guggenheim ASEAN Leaders ETF though the sponsor has not yet decided
on the ticker symbol. Moreover, the index has not been specified,
with no mention made of the expense ratio.
The proposed fund will seek to invest in the Association of
Southeast Asian Nations, including the Philippines, Indonesia,
Malaysia, and Singapore (read:
Malaysia ETF: the Perfect Emerging Market Fund?
The weightings of individual companies in the index will be in the
range of 15% to a maximum of 35%, while sector weightings within
each country are capped at 40%. The fund seeks to invest in common
stock, American depositary receipts as well as global depositary
receipts comprising the index.
Additionally, the financial services sector is expected to dominate
How might it fit in a portfolio?
This ETF, if approved, would give investors an opportunity to
invest in the overlooked ASEAN bloc. The ASEAN bloc has a combined
GDP of $2.2 trillion, having more than 10% of the world's
Moreover, the surge in the middle class, a low-cost manufacturing
sector and a highly productive labor force are expected to boost
foreign direct investment.
The ASEAN Economic Community, which is expected to come into
existence by the end of 2015, is anticipated to further eliminate
tariffs and other trade barriers within the ASEAN region.
Obviously the economies of the Philippines, Indonesia, Malaysia and
Singapore might be vulnerable to some internal and external
economic influences and they are heavily dependant on exports to
developed markets for growth (read:
Are Singapore ETFs Back on Track?
Can it succeed?
The ETF looks to face direct competition from
Global X FTSE ASEAN 40 ETF
). Launched in 2011, the fund seeks to tap 44 companies in the five
ASEAN nations, namely, Indonesia, Philippines, Singapore, Malaysia
However, the fund hasn't seen a huge level of interest as the ETF
has only managed to amass assets worth less than $50 million.
Moreover, volumes are a little dry at just 50,000 shares moving
hands each day. The fund charges 65 bps in fees a year from
investors and has delivered flat returns so far this year.
Guggenheim's ASEAN ETF will also face competition from other
emerging market ETFs that invest beyond the BRIC nations. Likely
competition would come from
SPDR MSCI Beyond BRIC ETF
(EMBB), which has recently been filed with the SEC, and also from
EGShares Beyond BRICs ETF
State Street Plans Ex-BRIC Emerging Market ETF
EMBB focuses on 17 developing countries (excluding BRIC) including
Chile, Colombia, the Czech Republic, Egypt, Hungary, Indonesia,
Malaysia, Mexico, Morocco, Peru, the Philippines, Poland, South
Africa, South Korea, Taiwan, Thailand and Turkey.
BBRC has accumulated $11.6 million since its debut last year (see:
all the Emerging Market ETFs
here). The fund holds 50 securities in its basket and charges 85
bps in fees a year from investors. The ETF is down nearly 2.55%
year to date.
The ASEAN focused fund from Guggenheim, if approved, will give
investors another alternative to play the emerging markets beyond
BRIC. However, the lackluster volumes in the current ASEAN ETF
suggest that the proposed ETF might find it a little
difficult to garner assets, though only time will tell if this
holds true for the Guggenheim product as well.
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GLBL X ASEAN 40 (ASEA): ETF Research Reports
EGS-BEYOND BRIC (BBRC): ETF Research Reports
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