Introducing the WisdomTree Korea Hedged Equity Index
The WisdomTree Korea Hedged Equity Index (WTKRH) uses a rules-based process for selecting and weighting securities while managing the Korean won risk.
• The universe comprises the profitable companies incorporated in South Korea that are traded in Korean won, with a minimum market capitalization of $1 billion
• Less than 80% of revenues derived from within South Korea
• Weighting: Annually rebalanced to the Earnings Stream (net income) in latest fiscal year
o A 10% cap to any individual security, and a 4.5% cap to the second-largest individual security at the time of the annual Index rebalance
o A cap of 25% to any individual sector at the time of the annual Index rebalance4
South Korea, like India, is a country that pays out a relatively small percentage of its earnings as dividends. Thus, in the case of both India and South Korea, WisdomTree uses the total dollar value of earnings (the Earnings Stream) to anchor Index constituent weights and most broadly reflect the fundamentals of those markets.
Differences in Sector Weight Compared to MSCI South Korea Index
WisdomTree’s approach with WTKRH led to very different sector weights than the MSCI South Korea Index, as of September 30, 2013.
Sector Exposures of MSCI South Korea Index vs. WTKRH (as of 9/30/2013)
• Financials: The most notable under-weight for WTKRH (due to its local market bias) is in the Financials sector, where the Index actually has no exposure but the MSCI South Korea Index has almost 17%.