Northern Trust Launches Three More International ETFs

Northern Trust is providing more choices for investors who want international exposure in their exchange traded fund (ETF) portfolios with the launch of three more funds.

The new funds, which cover Italy, South Africa and Singapore, are:

• S&P/MIB Index Fund (ITL): tracks the price and yield of publicly traded companies in the Italian equity markets. Stocks are traded on the Borsa Italiana and are free-float adjusted, with a market-cap weighted index.
• NETS FTSE/JSE Top 40 Index Fund (JNB): tracks the price and yield of publicly traded companies on the South African stock exchange. Focuses on the top 40 companies on the Johannesburg stock exchange.
• NETS FTSE Singapore Straits Times Index Fund (SGT): consists of 50 of the most liquid stocks, based on average daily trading volume, traded on the Singapore stock exchange.

Northern Trust began rolling out its line of international ETFs last month, and there are more yet to come, including an Ireland ETF.

Northern Trust Enters ETF Arena With First ETFs To Track Major Foreign Market Indexes

With its new line of exchange traded funds (ETFs), Northern Trust opted to stay true to their principles while traveling around the world.

Is it a sign that ETFs are slowly entering the mainstream and gaining acceptance as more than just a passing fad? An institution as old and well-known as Northern Trust entering the market could be a sign.
 

"We know who we are. We knew what we needed to bring to the market, something that was consistent with our notions of asset management overall," says Peter Ewing, the managing director of Northern Trust's ETF group.

The first batch of funds, the first to track major foreign market indexes, were a year in the making. Ideas were kicked around as the world's third-largest asset manager of institutional index-based assets felt it needed to seriously consider an ETF product line. In 2007, the management committee gave the go-ahead and they filed with the Securities & Exchange Commission (SEC).

"Our opening salvo is traditional," Ewing says. But the provider isn't averse to more inventive ETFs and strategies. But for now, "We want to stay true to our principles."

Northern Trust's ETFs, which all have an expense ratio of 0.47%, are:

• NETS S&P/ASX 200 Index Fund (AUS): Represents Australia
• NETS DAX Index Fund (DAX): Tracks Germany's major exchange
• NETS FTSE 100 Index Fund (LDN): Invests in the largest companies by market cap on the London Stock Exchange
• NETS CAC40 Index Fund (FRC): Represents France
• NETS Hang Seng Index Fund (HKG): Represents Hong Kong
• NETS TOPIX Index Fund (TYI): Represents Japan

At a later date, there will be funds issued that cover Belgium, Ireland, Portugal, South Africa and more.

International Markets, ETFs Catching U.S. Housing Disease

The U.S. housing crisis is taking its toll on other countries, and it could hit their exchange traded funds (ETFs) if it persists for long.

Real estate prices are plummeting in the Irish countryside, the Spanish coast and even parts of Northern India, reports Mark Landler for the New York Times. Some property analysts abroad are expressing fear of a wholesale collapse. Western European once were buying investment properties in places such as Warsaw and Estonia - but no longer. In India, prices have dropped 20% in the last year.

The International Monetary Fund cut its global economic growth forecast last Wednesday, and said the downturn could carry through to 2009.

The SPDR DJ Wilshire International Real Estate (RWX) could feel the pinch if the crisis continues to spread. Year-to-date, the fund is down 7.8%. Some single-country funds may also experience some bruising:

• The New Ireland Fund (IRL), down 2.9% year-to-date
• WisdomTree India Earnings (EPI), down 13.6% since Feb. 26 inception
• PowerShares India (PIN), down 6.7% since March 5 inception
• iShares MSCI Spain (EWP), down 3.1% year-to-date

The troubles stateside aren't getting much better. J.W. Elphinstone for the Associated Press reports that home foreclosures jumped 57% in March. A rash of adjustable-rate loans are also scheduled to reset in May and June, as well, meaning yet more foreclosures are likely in the third and fourth quarters.

How will real estate ETFs react in the long run?:

• iShares Dow Jones US Real Estate (IYR), down 0.3% year-to-date
• iShares Cohen & Steers Realty Majors (ICF), up 2.8% year-to-date
• DJ Wilshire REIT (RWR), up 2.4% year-to-date

For full disclosure, some of Tom Lydon's clients own shares of EWP.

Irish And Malaysian ETFs Feel Political Pressure

One of the biggest risks associated with overseas or emerging markets exchange traded fund (ETF) investing has to do with political upheavals that affect the country's economy. A good example is the recent news that will have an impact upon the iShares MSCI Ireland (IRL) and the iShares MSCI Malaysia (EWM).

Irish prime minister Bertie Ahern announced his resignation yesterday amid ongoing questioning about cash donations made to him when he was finance minister in the 1990s. Carl Delfeld for ETF Folio says Ahern will step down from his position to be succeeded by Mary McAleese on May 6th, just prior to the Irish referendum concerning the European Union reform treaty.

Ahern was a key factor in Ireland's economic boom, so the country will be watched closely as it makes its transition to a new leader.

Year-to-date, the fund is down 1.1%.

In Malaysia, the Prime Minister Abdullah Badawi has a weakening office, as members of his cabinet have stepped down, while supporting an open contest for key leadership posts. His UMNO Party is facing hard challenges from opposing parties. Leading companies, such as Telekom Malaysia, have had to be restructured. Routes have been cut from Malaysian Airlines and extra staff have been cut.

Abdullah, like Ireland's Ahern, has had a hand in Malaysia's boom. Capital controls and corruption have come down, and capital structures and costs operate more transparently and efficiently.

Malaysia's fund, after having a strong start earlier this year, is down 8.4% year-to-date.

Gold ETFs Lie At the End of the Rainbow

Aye, laddie. Lookin' for a pot of gold at the end of the rainbow via an exchange traded fund (ETF) this St. Patrick's Day, are ye?

Okay, we'll stop with the accent.

It turns out that although gold futures briefly hit a new record this morning, at $1,033 an ounce, reports Pham-Duy Nguyen for Bloomberg, gold-related ETFs aren't feeling the love this jovial holiday.

Market Vectors Gold Miners (GDX) was down 3% intraday, while streetTRACKS Gold Shares (GLD) was up just slightly and iShares COMEX Gold Trust (IAU) was down a hair. Overall, these funds have been very strong for awhile now because of the high price of gold.

If you got in on the gold rush before the prices really began to soar, you could probably spring for a round or two tonight at the bar.

Meanwhile, we're still waiting for an Ireland ETF. The only way to access the Emerald Isle at the moment is through the New Ireland Fund (IRL), a closed end fund (CEF).

Not All the Good Ideas Are Taken With ETFs

W.P. Thatcher for Stocks For All Seasons has 10 exchange traded funds (ETFs) in mind that he'd like to see come to market.

Long gone are the days of only the plain vanilla fund, so let's see what he has to add. Among his picks are:

• More commodity ETFs. Where are ETFs for pork bellies, cocoa and lumber? Most people aren't sophisticated enough to handle futures trading, but they still need exposure to this asset class. There is the Claymore/Clear Global Timber Index (CUT), but it doesn't track futures.

• Momentum stocks ETF. I don't know how this could be done cheaply due to the constant shifts in buying and selling, but there would be HUGE demand for it.

• An ETF for distressed debt. Let retail investors be vulture investors for a day.

• Real estate ETFs for specific housing markets.  People forget that we have many housing markets.  Not everywhere is tanking.

• A collectibles ETF. This would be very hard to value, so it might have to be in something really liquid like Bordeaux futures or Old Masters.

Late last year, we drew up our own wish list of ETFs. How are things coming along so far?

• State ETFs: Yep! The first state ETF is projected to be Oklahoma's, and it's scheduled to launch in late April. The fund will be made up entirely of stocks issued by the state's publicly traded companies.
• Ireland ETF: Wouldn't it be nice to have one in time for St. Patrick's Day? That would be something worth hoisting a Guinness for. Alas, there's always next year.
• Global Wireless ETF: Nothing doing yet, and there isn't anything in registration.
• Mortgage ETF: The market will turn around someday, but this kind of fund isn't a high priority right now.
• An ETF of ETFs: We've predicted that there will be one to launch this year, but so far, there hasn't been one. Luckily, there are nine months left.
• Dry Shipping ETF: A fund like this could capitalize on increasing globalization, but it has yet to materialize.

You Can't Always Judge an ETF By Its Name

In December, Barclays added another international exchange traded fund (ETF) to its lineup: the iShares MSCI Kokusai Index Fund (TOK).

 TOK covers 1,203 holdings in 22 developed markets, minus Japan, with the United States taking the most holdings at 50%. The second-largest constituent is the United Kingdom, at 12%. There are also holdings in Austria, Belgium, Ireland, Italy, New Zealand, Spain, Sweden and Switzerland.

The largest holding is ExxonMobil Corp. (XOM) at 2%. It's most heavily concentrated in financials, at 24.7%. When the fund launched, Matt Hougan for Index Universe wondered if it wasn't a strange product to launch on a U.S. exchange since, after all, most U.S. investors are already invested in this market and would instead want exposure to Japan in their portfolios.

But the most intriguing thing about the fund, we think, is its name: "kokusai" is the Japanese word for "international." It's an interesting choice of word for a fund with no holdings in Japan.

Post-Holiday ETF Dreaming

The holidays are over, and we're already poking around the tree for any missed presents and thinking about what we'd like for next year's helping of exchange traded funds (ETFs).

Matthew Hougan at IndexUniverse drew up his wish list, which consists of:

• A cheaper commodity fund. Expenses are at .75% annually.
• A smarter commodity fund. Straight indexing isn't the way to go with commodities, he says.
• A VIX Volatility Index fund. It would have been the best-performing ETF this year.
• More strategy products. People are ready for some complexity.
• Frontier Market ETFs. Despite the issues regarding liquidity and foreign ownership restrictions, there's room for exposure.

I've been doing some dreaming, too, and here's my list:

• A global wireless ETF. All we've got right now are the Merrill Lynch Wireless HOLDRs (WMH), which cover U.S. wireless and about 50% global. We're going global and seeing more and more emerging markets get in on wireless technology, so where's the ETF for them?
• An Ireland ETF. With millions of Irish Americans (or millions of Americans who just wish they were Irish) and an expanding economy -- when are we going to be able to raise a pint of stout to an ETF representing the Emerald Isle?
• State ETFs. There are currently 21 StateShares for individual states in registration with the SEC. Will they see the light of day in 2008? The market cap for California based companies is greater than some countries - investors might be ready for that kind of investment.
• A mortgage ETF. You just did a double-take, but hear us out: when the real estate market picks up again, the mortgage companies are going to do well -- they typically do when real estate is strong. Sooner or later, we're going to want a mortgage ETF to capitalize.
• An ETF of ETFs. Canada has one. Why not us? We've predicted an ETF of ETFs for 2008, but will it actually happen? One can dream.
• A dry shipping ETF. Global trade is growing by leaps and bounds. Now, how about a fund to capitalize?

With Any Luck, There Could Be an Irish ETF

Will there be an Irish exchange traded fund (ETF) available in the United States any time soon? It looks like there is clearly a demand for an ETF based on the Irish market, if the feedback from institutional investors, stockbrokers and investment bankers is any indication. The Irish stock exchange launched a market for an ETF based on the 20 most liquid equities, back on April 22, 2005. The press release for The Irish stock exchange says the total expense ratio is 0.5% based on assets under management and the trading takes place under the ISEQ 20 Exchange Traded Fund PLC on the Irish stock exchange. The top holdings include Allied Irish Bank, CRH, Bank of Ireland and RyanAir.

If we get enough positive feedback, I'll contact the Irish Stock Exchange and try to get this ETF available in the US.

Where's Ireland's ETF?

Although Ireland has a closed-end fund (CEF), it would be wonderful if they could get an exchange traded fund (ETF) by the time St. Patty's Day comes.

Unfortunately, the New Ireland Fund (IRL) hasn't been doing so well lately. Currently, it's down 22% year-to-date. IRL's decline seems unusual when its top holding has experienced good news recently. CRH, a building-materials company, is IRL's top holding at 16.5%. The company announced that it is going after $4 billion in Cemex assets and has been moving into U.S. markets to take advantage of pressure on the housing and construction industry, says Carl Delfeld for ETF XRAY. However, IRL's second largest holding, Allied Irish Banks at 14.9%, has run into some problems. Banking problems such as a mismatch between funding and lending rates have been a big issue. The company's stock took a 7.1% hit early this week.

The Irish economy already was cooling before the international credit squeeze hit. House prices that have been impacted by low interest rates are easing, which indicates an impending crash will not occur, reports Ralph Atkins for the Financial Times. However, some analysts predict that the country will see a recession. The Fianna Fail prime minister countered the negative speculations on the economy by reminding everyone that the Irish economy has been growing at about 7% for the last 15 years. If the economy were to grow by only 4% next year, it wouldn't mean economic despair.