Vanguard, the second-largest U.S. issuer of exchange traded funds, said today it is expanding four of its widely held international ETFs, including the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO).
As a result of last week’s announcement from FTSE Russell that the index provider will elevate China A-shares to its global benchmarks, VWO will transition to the FTSE Emerging Markets All-Cap China Inclusion Index from the FTSE Emerging Index. FTSE Russell said China A-shares will account for about 5% of the FTSE Emerging Markets Index, the underlying benchmark VWO, the largest emerging markets ETF by assets. [A-Shares ETFs Surge on FTSE News]
“The initial weighting of China A Shares in the FTSE Emerging inclusion indexes will be approximately 5%. This is expected to increase to 32% (at 31-March 2015 market values) when China A Shares are fully available to international investors, and hence resulting in Chinese stocks (including B-Share, H-Share, P Chips and Red Chips) to make up 50% of FTSE Emerging Index,” said FTSE Russell in a statement.
VWO had a weight to China of 28.6% at the end of last month, according to Vanguard data. China A-shares will represent 5.6% of the new benchmark for the Emerging Markets Index Fund, according to the issuer.
The $52 billion Vanguard FTSE Developed Markets ETF (NYSEArca: VEA), the $20 billion Vanguard FTSE Europe ETF (NYSEArca: VGK) and the $6 billion Vanguard FTSE Pacific ETF (NYSEArca: VPL) are also undergoing changes.
Those ETFs “will move from FTSE benchmarks containing large- and mid-capitalization stocks to broader FTSE benchmarks that include large-, mid-, and small-capitalization stocks,” according to a Vanguard statement.
VEA, VGK, VPL and VWO will all see significantly increased small-cap exposure as a result of the index transitions. Under the funds’ new benchmarks, small-cap stocks will account for approximately 9%-11% of each fund, according to Vanguard.