iShares, the San Francisco-based largest ETF company by total assets, launched four new “Core” funds in October, targeting investors who wish to build long-term, buy-and-hold portfolios. The four new ETFs include three international stock funds and a short-term Treasury ETF.
The four new ETFs are mostly based on broader indexes and hence are pure indexing tools. The funds include iShares Core MSCI Total International Stock ETF (IXUS), iShares Core MSCI EAFE ETF (IEFA), iShares Core MSCI Emerging Markets ETF (IEMG) and iShares Core Short-Term US Bond ETF (ISTB).
iShares Core Short-Term US Bond ETF (ISTB): ISTB tracks the Barclays US Government/Credit 1-5 Year Bond Index and seeks exposure in short-term US/non-US investment grade bonds. The index measures the performance of US dollar-denominated US Treasury bonds, government related bonds (US and non-US agencies, sovereign, quasi-sovereign, supranational and local authority debt) and investment-grade US corporate bonds that have a remaining maturity of less than five years but greater or equal to one year and have $250 million or more of outstanding value. In terms of country-wise holding, US top the chart with 89.42 percent of total assets. Canada, Germany, UK and France are the other top holdings. The fund has an expense ratio of 0.12 percent.
iShares Core MSCI Emerging Markets ETF (IEMG): The fund follows the performance of the MSCI Emerging Markets Investable Market Index, a equity benchmark designed to measure large-, mid- and small-cap equity market performance for emerging markets. MSCI reviews the index quarterly and the component companies are adjusted for available float to ensure they meet the objective criteria for inclusion to the benchmark. The index was comprised of 2,622 constituents from 21 emerging market countries as of Sep 30, 2012. Components primarily include financials, information technology, energy and materials companies.
At least 80 percent of assets are generally invested in depositary receipts representing securities of the underlying index and in securities of the underlying index. The remainder of its assets may be invested futures, options and swap contracts, cash and cash equivalents that include money market funds, and securities not included in the underlying index. The fund has mopped up an impressive $432 million in only three months since its launch in October. IEMG has an expense ratio of 0.18 percent.
iShares Core MSCI EAFE ETF (IEFA): The fund seeks to generally replicate the price and yield performance of the MSCI EAFE Investable Market Index, an equity benchmark designed to measure large-, mid- and small-cap equity market performance and includes stocks from Europe, Australasia and the Far East.
As of 23 January, 2013, the fund had maximum exposure in UK stock indexes (21.88%), followed by Japan (20.20%), Australia (9%), Switzerland (8.57%) and France (8.43%).
Sector-wise, financials get the top billing (24.37%), followed by industrials (13.56%), consumer discretionary (11.57%), consumer staples (10.93%) and materials (9.76%). The fund has accumulated more than 352 million in assets since its launch in October. IEFA has an annual expense ratio of 0.14 percent.
iShares Core MSCI Total International Stock ETF (IXUS): The ETF tracks the performance of the MSCI ACWI ex-USA Investable Market Index, a equity benchmark designed to measure the performance of emerging and developed market countries, excluding the US.
Region-wise, the United Kingdom gets maximum exposure (14.99%), followed by Japan (13.72%), Canada (8.05%), Australia (6.12%) and Switzerland (5.84%).
Sector-wise, financials get the top billing (24.92%) followed by industrials (11.41%), materials (10.63%), consumer discretionary (10.32%) and consumer staples (9.27%).
The fund has accumulated total assets of $78 million since its launch in October. IEFA has an expense ratio of 0.16 percent.
While these new ETFs are meant to be a buy and hold proposition, that to me is not a good idea given the manipulated and volatile market environment we’re in. However, as time goes on, and these newcomers develop sufficient price and volume history, they could possibly be used with the trend tracking approach.
Disclosure: No holdings