What's The Difference? A Look At Two South Korea ETFs

ETF issuer First Trust rolled out 13 new AlphaDEX

on Tuesday, one being the First Trust South Korea AlphaDEX Fund

. An interesting gambit to be sure given that FKO faces stiff competition in the form of the already-well-established iShares MSCI South Korea Index Fund

. FKO faces quite a mountain to climb as EWY has been trading for nearly 11 years and has accumulated more than $5.1 billion in assets under management in that time. So are the differences between the two funds enough to make FKO a legitimate rival to EWY? More importantly, does FKO offer enough to warrant an expense ratio of 0.8% compared to 0.61% for EWY? Let's see. For starters, FKO holds 50 stocks while EWY holds 105. Samsung accounts for over 16% of EWY's weight, but is not found in FKO's top-10 holdings. In fact, Honam Petrochemical, FKO's largest holding, gets an allocation of just 3.73%. Overall, there isn't a lot of duplication between the top-10 holdings of both funds as only Kia, LG, and Posco

appear among the top holdings in both ETFs. There are also significant differences at the sector level. EWY allocates more than 26% of its weight to information technology, but that sector gets a weight of just 6% in FKO. Industrials account for 24% of FKO, but just 16% of EWY. Financials account for over 15% of EWY, but less than 10.5% of FKO. Materials acccount for almost 20% of FKO's sector weight, but less than 15% of EWY's. Also of note is that FKO tracks a dollar-weighted index, which is different than the passive index EWY tracks. According to FKO's literature, that could help generate positive alpha relative to a passive index. That might be the way FKO is able to outperform EWY, which it will probably need to do to justify its higher fees. Then again, there always seems to be room for another emerging markets ETF. Just look at Russia. The prospects for the two ETFs that followed the Market Vectors Russia ETF

may have looked dubious to start as both offer few differences when compared against RSX than can be found between FKO and EWY, but RSX's rivals have been able to gain some traction with investors. Now FKO gets its chance to prove there is room for another mid-/large-cap focused South Korea ETF.