Checking In: Seoul Style

Considering it's the world's 15th-largest economy and will be promoted to developed market status sometime in the near future, there aren't a lot of ETFs devoted exclusively to South Korea. To be sure, there are plenty of ETFs, 50 give or take a couple, that offer exposure to South Korea, but the reality is the iShares MSCI South Korea Index Fund

is the oldest and largest. Largest by a substantial margin. The 109-stock ETF has almost $3.3 billion in assets under management, easily dominating any and all challengers in the South Korea-specific ETF market place. Still, there's a challenger to EWY's throne and it comes in the form of the First Trust South Korea AlphaDEX Fund

, which made its debut in April. To date, FKO hasn't put much of a scare into EWY. The First Trust offering has just $1.2 million in AUM and average daily volume of less than 620 shares. There are some differences that highlight the fact that FKO isn't a carbon copy of EWY. For example, FKO uses a selection methodology which uses fundamental growth and value factors to objectively select stocks from the S&P South Korea BMI universe which may generate positive alpha relative to traditional passive indices. The index is a modified equal-dollar weighted index where higher ranked stocks receive a higher weight within the index. That means FKO's weight is spread a bit more evenly than EWY's. To its credit, FKO offers double-digit exposure to five sectors – consumer discretionary, materials, industrials, technology and telecom. On the other hand, FKO's expense ratio of 0.80% is nearly 20 basis points higher than the fees charged by EWY. That's not a good thing when you've got a new ETF looking to steal assets from a fund that is as well-established as EWY. Nor is the fact that FKO is down almost 22% year-to-date. That makes the almost 10% drop suffered by EWY look nice by comparison. And given that wide chasm in performance, it's entirely possible that even if EWY starts performing well, FKO could keep lagging its bigger rival. For now either FKO's performance needs to sharply reverse or the ETF needs to see its expense ratio trimmed to less than EWYs to make this is a legitimate rivalry. Bull case: South Korea remains a favored destination for conservative emerging markets investors and the country's inflation remains benign while GDP growth remains reliable. Bear case: EWY performs well, but FKO doesn't. Volume and assets thin out even more. If that happens, FKO may not be around much longer.