Roughly 200 new exchange traded funds came to market in 2014, but by the end of the year, nearly half had accumulated at least $10 million in assets under management.
That speaks to increasingly competitive ETF landscape, one that also serves to spotlight new ETFs that find quick success, including the WisdomTree Europe Hedged SmallCap Equity Fund (NYSEArca: EUSC). Just three weeks old, EUSC had $111 million in assets under management as of March 24, adding the new funds to the pantheon of ETFs that have come to market as different spins on successful, already established ETFs.
It has a way to go, but EUSC has the potential be akin to the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), the follow up to the Market Vectors Gold Miners ETF (NYSEArca: GDX) or the SPDR Barclays Short Term High Yield Bond ETF (NYSEArca: SJNK), the follow up to the SPDR Barclays High Yield Bond ETF (NYSEArca: JNK), the second-largest high-yield bond ETF. [ETF Sequels to Consider]
EUSC having its table set by the WisdomTree Europe Hedged Equity Fund (NYSEArca: HEDJ) certainly helps. Put simply, EUSC is HEDJ’s small-cap equivalent. In a year in which HEDJ has pulled in $9.6 billion, more than any other ETF, being HEDJ’s small-cap cousin is an enviable moniker and an advantage.
The new ETF tracks the WisdomTree Europe Hedged SmallCap Equity Index, which like the underlying for HEDJ includes a dividend component. EUSC’s index “is comprised of the bottom 10% of the market capitalization of the European companies traded in Euros from the WisdomTree DEFA Index. The component securities are weighted in the Index based on annual cash dividends paid with the following caps: maximum individual position capped at 2%, maximum sector weight capped at 25%, and maximum country weight capped at 25%,” according to WisdomTree.
The WisdomTree Europe Hedged SmallCap Equity Index sports a dividend yield of nearly 3.6% and is heavily tilted toward mid-caps, or stocks with market values north of $2 billion up to $10 billion. Mid-caps represent nearly three-quarters of the index’s weight, according to issuer data. [HEDJ Gets a Small-Cap Cousin]
Small-caps are even more leveraged to European revenue story.
“Euro-area small caps tend to have approximately twice the European revenue exposure as euro-area exporters, thereby offering significant complementarity and more direct exposure to any improvements or sensitivity to local economic conditions,” said WisdomTree Research Director Jeremy Schwartz in a note published when EUSC launched.
EUSC Country Allocation
Table Courtesy: WisdomTree
Tom Lydon’s clients own shares of HEDJ.