Global X Management, a New-York based startup, has launched its first exchange traded fund (ETF) and has decided to enter a niche market where others have failed.
The asset management firm has registered to sell ETFs in targeting six different markets. These markets include Colombia, the Philippines, Peru, Argentina, Egypt and the Nordic countries. The ETF that tracks the Colombian market, Global X/InterBolsa Colombia 20 ETF (GXG), actually launched last month and was the first of its kind to give investors pure exposure to the emerging market.
Global X is not the first to dip into this market. Northern Trust took a stab at it last year and ended up throwing in the towel earlier this month and closing all 17 of their NETS funds, citing lack of assets and deteriorating market conditions.
A challenged market is something Global X is up against, too, but the provider is optimistic about its prospects when a turnaround begins. While Colombia is a frontier market, there are well-run publicly traded companies there. And Colombia will emerge from the stigma as the world’s cocaine capital. Remember: India, China and Brazil at one time had bad reputations to overcome, too.
So what will differentiate Global X from Northern Trust? Murray Coleman of Index Universe states the following:
- Global X’s managers are going to be patient and not flood the market by launching a dozen or more ETFs at the same time, as Northern Trust did.
- There will be uncontested opportunity for the firm. The only competition will come from Barclays, which has filed for an ETF to track Peru and Market Vectors, which has filed for an ETF to track Egypt. No one else has even dared to consider the other markets.
- The company plans on dual listing its ETFs in the United States and in the country that the ETF is tracking. In fact, the company’s Colombia ETF is nearing a listing on the Bolsa Exchange.
- Using FTSE to design its specific indexes will attract ETF investors around the globe.
It seems like the firm has found a pretty nice niche for themselves, but it will most definitely be an uphill battle. With the current market volatility, investor sentiment and global economic recession, it will be a tough sell to convince investors to take a risk on these emerging markets.
For those of you that do want exposure to these markets, this may be the way to go. Remember to always know what your fund is holding and what its asset distribution percentages are.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.