Guggenheim, the seventh-largest U.S. issuer of exchange traded funds with $28.3 billion in assets under management as of Sept. 15, features a lineup of four China ETFs that benchmark to AlphaShares indices.

Two of those funds – the Guggenheim China Small Cap Index ETF (NYSEArca: HAO) and the Guggenheim China Real Estate ETF (NYSEArca: TAO) – will not hold Alibaba. However, after Alibaba makes its debut on the New York Stock Exchange Friday under the ticker “BABA,” at least one of Guggenheim’s other China ETFs will eventually be an ETF home to the Chinese e-commerce firm.

AlphaShares, the index provider behind the AlphaShares China All-Cap Index, the underlying index for the Guggenheim China All-Cap ETF (NYSEArca: YAO), confirmed to ETF Trends that Alibaba will eventually make its way into that $53.2 million ETF. [Alibaba’s ETF Prospects Improve]

YAO, which has a tradition of outperforming the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China ETF, makes for a logical destination for Alibaba. The AlphaShares index YAO tracks is significantly less levered to financial services firms and state-run enterprises than is FXI.

YAO allocates just 30.2% of its weight to financial services firms, but also features a 19.3% weight to Chinese technology stocks. That includes a combined 12.5% weight to Tencent Holdings (OTC: TCEHY) and Baidu (NasdaqGS: BIDU), two established and direct competitors to Alibaba. While AlphaShares confirmed Alibaba’s entry into YAO’s index, the issue is when the stock joins that index and, subsequently, YAO. [This ETF Might Get Some Alibaba]

The AlphaShares addition methodology mandates that if a stock is positioned to be a top-20 holding in one of the firm’s indices, it can be added on the third Friday of the last month of a particular. Alibaba happens to be going public on such a day. So while YAO may not pickup Alibaba immediately, the stock will likely find its way into the ETF before the end of 2014.

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