ETF Trends
ETF Trends

By Todd Rosenbluth, CFRA

According to Google Translate, there are five different Chinese words for choice. ETF investors can relate to that.

For example, iShares China Large-Cap ETF (FXI) is the biggest ETF focused on China with $3.1 billion in assets and it gained 10% year to date through April 13. Meanwhile, the firm also offers iShares MSCI China (MCHI), a $2.2 billion ETF that climbed 16% this year. While MCHI has a 10 basis point lower expense ratio, the differential stems more from what’s inside these popular products.

FXI recently had 50% of assets in financial stocks and 13% in energy with just 9% in information technology stocks. In contrast, MCHI had less exposure to financials (29% of assets) and energy (6%) and more to technology (33%) and consumer discretionary (10% vs. 2%). For both ETFs, tech exposure is primarily through Internet software & services companies such as Tencent Holdings, but only MCHI holds Alibaba Group (BABA) and Baidu (BIDU).

Yet, there are strong ETF choices offered by other asset managers. SPDR S&P China ETF (GX) is up 15% in 2017, yet it has a higher stake in technology (29% of assets) and lower one in financials (24%) than MCHI. At a net expense ratio of 0.59%, GXC is 5 basis points cheaper than MCHI. In the three-year period, GXC generated a 7.4% annualized total return and outperformed MCHI by more than 50 basis points. The SPDR ETF has $830 million in assets.

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