Invest in Global IPOs with This New ETF - ETF News And Commentary

It seems that international IPO ETFs have become favorites of some issuers. Renaissance Capital has recently come up with an international IPO ETF while First Trust planned such an ETF in August. Notably, both issuers presently have IPO ETFs at the domestic level too.

However, it looks as though Renaissance Capital has beaten First Trust to the market in the international IPO ETF world. Renaissance's new ETF trades under the name of Renaissance International IPO ETF with the ticker code of IPOS, and it hit the market on October 6.

The new fund tracks the Renaissance International IPO Index. The index includes a decent number of new companies after the fifth day of trading (important firms on a fast-entry basis) and the remaining after slated quarterly reviews. Two years after their IPOs, the stocks get out of the index. The product charges 80 bps in fees.

As of September 30, 2014, the ETF puts the largest weight of 18.9% in the U.K. Japan follows U.K. with about 11.5% holdings. Emerging markets get about one-fourth of the total holdings.

The top holdings of the index consist of BB Seguridade Participacoes SA (5.3%), Direct Line Insurance Group Plc (4.5%) and Altice SA (3.13%). Overall, the ETF holds more than 100 stocks with less than 30% of assets invested in top 10 holdings.

The current portfolio is focused on mid cap stocks with more than two-fifth of the total. Small caps take a decent share of the rest of the portfolio, with large caps accounting for around 20% of total assets. The ETF holds 10% of assets in cash.

From a sector look, there is a tilt toward financial stocks (23%), while industrials (15%), consumer discretionary (14%) and real estate (13%) round out the top four. Several segments — like energy (1%) and technology (2%) — receive meager allocations in the ETF.

This new product could be an interesting choice for investors seeking exposure to IPOs in the international market.  The IPO market continues to be hot globally. An improving global economy, though sluggish, and extremely low levels of interest rates in many developed nations led to this surge (read:

).

Renaissance Capital made itself known for its huge knowledge on IPO-related services which can act as a driver to the investors. This can further be validated by the $2 million assets generated by IPOS within just a week of launch. Also, the global IPO market is growing by leaps and bounds. In such a situation, investors would definitely take interest in IPO-related ETFs.

As we have said in the beginning IPO ETFs space has been ruled by the duo Renaissance and First Trust.  There are at present two products operating in the market on the U.S. IPO theme. These are

and

(read:

).

FPX is a popular fund with about $500 million in AUM since it debuted in 2006. On the other hand, IPO is a relatively new entrant in the space and has attracted $32.5 million in its asset base since its launch last year (read:

).

Although the latest joiner IPOS does not have any direct competitor as the foreign IPO space is still void of competition, this seems to be a short-term solace. In August, First Trust filed for an international version of FPX. Once First Trust gets an approval, IPOS will get its peer competitor in this corner of the market (read:

).

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