Market Overview

Checking In: From Russia And Still Here


Today's candidate for Checking In inspection is timely because Russia has been the top performer among the BRIC quartet in 2011. Ah yes, Russia is living the dream right now with high oil prices, which are important because Russia's economy is based on three industries: Energy, energy and, oh yeah, energy.

And that's exactly what you'll get with the iShares MSCI Russia Capped Index Fund (NYSE: ERUS), an ETF that is almost 56% allocated to the energy sector. ERUS is the youngest of the three Russia-specific ETFs currently trading in the U.S. having made its debut in November.

When ERUS made its debut, plenty of ETF industry observers, the Professor included, wondered if this was Russia overkill. Why does the least dynamic BRIC member warrant three ETFs? The ETF world was fine with just the Market Vectors Russia ETF (NYSE: RSX). Surely iShares was making a mistake with ERUS, some thought.

Hold on. ERUS has done pretty well for itself in five full months of trading, accumulating almost $102 million in assets under management. That's still pretty far behind the SPDR S&P Russia ETF (NYSE: RBL), the second-to-market among Russia ETFs, which has almost $150 in AUM. Combined RBL and ERUS don't even sniff RSX's more than $4 billion in AUM, but apparently there is room for all three.

At 0.65%, ERUS has the highest expense ratio of the trio, but it does offer an interesting feature that is worth noting. ERUS has the highest weighting to the energy sector, beating RBL's 51.1% weight to energy and RSX's nearly 44% allocation to the sector.

For the active trader, ERUS probably isn't the preferred option as its average daily volume can't even touch RBL and that's saying something because RBL isn't anywhere in the vicinity of RSX when it comes to liquidity. Still, ERUS' asset total is impressive and it shows the ETF is here to stay. Plus, if you need that extra 5% in energy exposure, ERUS is your best Russian bet.

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