Van Eck Global, the New York-based fund provider behind the
Market Vectors ETFs, today rolled out an ETF that's built around
Warren Buffett's "moat" concept of investing in undervalued
companies that show sustainable competitive advantages over their
The Market Vectors Morningstar Wide Moat Research ETF
(NYSEArca:MOAT) is designed to serve up access to good valuations
while it seeks to generate dependable returns over time.
The fund will track the rules-based, equal-weighted Morningstar
Wide Moat Focus Index, which canvasses some 97 percent of the U.S.
market capitalization to find the top 20 companies that show the
best price-to-fair value ratios.
MOAT has an annual expense ratio of 0.49 percent a year.
Market Vectors is the first to put Warren Buffett's "moat"
concept into an ETF wrapper, but the fund is akin to the Elements
Wide Moat Focus ETN (NYSEArca:WMW) that was launched back in 2007.
The $14 million ETN is also tied to Morningstar's research
expertise and costs 0.75 percent.
So-called moats are determined by a company's intangible
assets-such as brand name and patents-as well as by its cost
advantages, economies of scale, switching costs and network
In order to get a "wide moat" rating, a company must generate
returns on new invested capital that exceed their cost of capital
for at least 20 years, according to information on Morningstar's
Indeed, only about 10 percent of the entire equity universe
Morningstar tracks gets a "wide moat" tag, but the small segment
has performed well relative to the broad stock market.
In the last decade, the Morningstar wide moat index has seen an
annualized total return of 15.3 percent, compared with 8.1 percent
for the S&P 500, according to Market Vectors data. Year-to-date
in 2011, the index is up 16.0 percent compared with the S&P
500's 12.6 percent increase in the same time frame.
The fund MOAT's portfolio is heavily tilted toward large-cap
names, with companies like Amazon, CME Group, Cisco Systems,
Northern Trust and Google topping its list of holdings.
From a sector allocation perspective, information technology is
the fund's biggest exposure at 25 percent.
Roughly 20 percent of MOAT is tied to financial services, and
another 30 percent is split between health care and materials. The
fund is rebalanced quarterly.
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