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Dialing Up An International Internet ETF

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Dialing Up An International Internet ETF
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Ex-U.S. Internet stocks, both developed and emerging markets fare, have long been accessible to investors via exchange traded funds. A new fund enhances that accessibility.

The First Trust Dow Jones International Internet ETF (NASDAQ: FDNI) debuted Tuesday.

What Happened

If the First Trust Dow Jones International Internet ETF sounds somewhat familiar, that's because it is. The latest ETF from First Trust is the international answer to the First Trust Dow Jones Internet Index Fund (NYSE: FDN). Home to $7.95 billion in assets under management, FDN isn't just the biggest Internet ETF, but one of the largest industry ETFs.

The new FDNI targets the Dow Jones International Internet Index. That index “is designed to measure the performance of the 40 largest and most actively traded international stocks in the internet industry,” according to S&P Dow Jones Indices. “To be eligible for the index, a company must derive at least 50% of its cash flow from the internet, as well as be classified in one of the 17 GICS industry groups that have internet-related companies.”

Why It's Important

FDNI comes to market at time of exponential growth of Internet and e-commerce use outside the U.S., particularly in emerging markets. China has more Internet users than the U.S. has citizens and data suggest many emerging markets shoppers spend discretionary income online or via mobile venues because those economies lack the traditional brick-and-mortar retail infrastructure found in the U.S. and other developed markets.

The new FDNI is home to 40 stocks hailing from several markets, but China is the dominant geographic exposure in the new fund. Alibaba Group Holding Ltd. (NYSE: BABA), Tencent Holdings (OTC: TCEHY) and Baidu.com (NASDAQ: BIDU) combine for approximately 30 percent of the new ETF's weight.

“The Internet is reaching further than ever before to connect our world, businesses and personal lives through what is known as the Internet of Things (IoT), or the billions of connected physical devices (cell phones, routers, wearables, home appliances, vehicles, to name just a few),” said First Trust. “We are now living in a universe of intelligent products, services and ways of conducting business that are increasing efficiency, while also uncovering a new era of economic growth.”

What's Next

FDNI charges 0.65 percent per year, or $65 on a $10,000 investment, putting it in the middle among Internet ETFs in terms of annual fees.

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