Both of the new indices are rules-based, modified cap-weighted, float-adjusted indices that try to follow the largest and most liquid global companies. The index constituents are required to generate at least 50% of their revenues from the industry they are engaged in, and the holdings are capped at 8%.
“We expect that KOL and BJK will become more diversified as a result of these changes,” Ed Lopez, Marketing Director at Van Eck Global, said in the press release. “They will continue, however, to offer pure play global exposure. Consistent with the Market Vectors index methodology, these indexes have limits on individual holdings which help to avoid overconcentration in a few large holdings.”
Industry observers have pointed out that providers are engineering their own private indices in an attempt to cut out other index providers, along with the hefty royalties that come with brand-name indices, and reduce costs for clients. [More ETF Providers Managing Indices]
For more information on indexing in ETFs, visit our indexing category.
Max Chen contributed to this article.