Three Ex-U.S. ETFs Your Broker Forgot to Mention
The SPDR S&P 500 (NYSE: SPY) is up nearly 12 percent year-to-date indicating investors have been, for the most part, rewarded for their confidence in U.S. stocks. Combine that with the goings on in the Eurozone, most of which have been negative, and dour performances by many of the largest emerging markets, and it looks like U.S. stocks are the place to be.
That does not mean investors should have no global exposure. In fact, some developed market ETFs have outpaced SPY this year. And yes, that group extends beyond the obvious winners, those being Japan ETFs.
Those not willing to make country-specific bets in their efforts to add international exposure can accomplish the objective through an array of so-called "ex-U.S." ETFs. Here are a few such funds that brokers may have forgotten about.
iShares MSCI ACWI ex US Index Fund (NASDAQ: ACWX)
The iShares MSCI ACWI ex US Index Fund may not get a lot of airtime, but this is not a small, thinly traded ETF. ACWX has $1.42 billion in assets under management and average daily volume of almost 240,000 shares.
Year-to-date, ACWX has returned 4.2 percent. That may not sound impressive, particularly compared to U.S. stocks. More concerning is that ACWX has only been able to generate a return of 4.2 percent when Japan accounts for 15.4 percent of its country weight. Australia, another strong equity market, checks in at almost 6.4 percent.
This is ACWX's big problem: The attractive exposure to Japan and Australia is being canceled out by laggard markets such as Canada, France, Germany, South Korea, China and Brazil. Combined, those countries represent about 30 percent of ACWX's. Of the major ETFs tracking that group, only the Germany and France funds are up year-to-date and only modestly so.
SPDR S&P World ex-US ETF (NYSE: GWL)
The SPDR S&P World ex-US ETF makes for an obvious rival to ACWX and investors have to dig deeper to make a decision between the two ETFs because both charge 0.34 percent per year. GWL is the smaller of the two, though it is by no means small with over $610 million in AUM. In fact, GWL has been rapidly growing, having added $298.2 million in assets over the past 12 months, according to Index Universe data.
GWL is up 4.2 percent year-to-date, but the ETF faces a similar dilemma to ACWX. The slight out-performance comes by virtue of slightly large allocations to Japan and Australia (a combined 28 percent). However, Canada, France, Germany and South Korea combine for 27.4 percent of GWL's weight.
Additionally, both GWL and ACWX feature the U.K. as their second-largest country weight. With that country flirting with a triple-dip recession, both ETFs need Japanese equities to continue soaring to buffer against a potential decline in U.K. equities.
WisdomTree Global ex-US Growth Fund (NYSE: DNL)
With $882. million in AUM, the WisdomTree Global ex-US Growth Fund is the smallest of the ETF's highlighted hear. The fund is also down 2.8 percent year-to-date, underscoring the notion that investors are apprehensive about global growth stocks.
Like its rivals, DNL has some country allocation issues, namely a combined 29.4 percent going to the U.K., Brazil, Germany and South Africa. Additionally, while the allocations are small, DNL features exposure to all the PIIGS nations except Greece.
There are some high points to DNL, though. First, although the ETF's do not imply as much, this is a dividend ETF. DNL tracks the WisdomTree Global ex-US Growth Index (WTG), which weighs companies annually based on annual cash dividends paid. Since the index was created in 2008, it has slightly outpaced the MSCI AC World ex-USA Growth Index, according to WisdomTree data.
Another highlight of DNL, and one that investors can only hope increases when the ETF next rebalances, is its exposure to some of this year's better emerging markets. Thailand, Indonesia, Mexico, Turkey and the Philippines combine for about 15.3 percent of the ETF's weight. Increased weights to those countries could boost DNL's returns, but there no guarantees those weights will raised.
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