VanEck has marked the third anniversary of the launch of the VanEck Vectors Morningstar US Wide Moat UCITS ETF (MOAT) on London Stock Exchange.

Morningstar’s Moat analysis seeks to identify firms with long-term structural competitive advantages, whether through cost advantages, regulatory protection, natural positioning, or brand loyalty.

The ETF provides exposure to US-listed equities that are considered by analysts at Morningstar to have “wide economic moats” – a significant and sustainable competitive advantage over peers.

The term was coined by Warren Buffett and refers to firms that have established a competitive advantage through, for example, brand loyalty, high switching costs, network effects, regulatory protection or economies of scale.

MOAT currently has $38 million in assets under management which is just a fraction of the size of its US equivalent – the $1.5 billion VanEck Vectors Morningstar Wide MOAT ETF. The Europe-listed ETF is likely to benefit from increased inflows, however, now that it has recorded a three-year trading history, a requirement of many institutional and wealth management investors.

The fund tracks the performance of the Morningstar Wide Moat Focus Index which screens the broad US equity universe. Approximately 10% of constituents are thought to possess a wide moat at any time. Potential constituents are further narrowed down by selecting those securities with attractive valuations.

The final index is composed of at least 40 companies (currently 54) that are equally weighted and rebalanced quarterly.

According to VanEck, the current US equities environment, with its stretched valuations and increasing bouts of volatility, suggests that a plain vanilla indexing approach to the market may be inefficient compared to models that work with a number of criteria.

Dimitri Klymenko, Product Manager at VanEck, commented, “The US continues to provide interesting opportunities for investment thanks to its strong economic growth and higher employment levels. Following the longest uptrend in the history of the US stock market, valuations are tense. In this setting, simply following the market means buying equities at valuation highs, which means that they are potentially overpriced. This inevitably reduces the earnings potential.”

MOAT returned 9.8% between 1 January and 30 September, compared to 9.4% by the S&P 500 Index.

The ETF comes with a total expense ratio (TER) of 0.49%. It is available on London Stock Exchange in US dollars (MOAT LN) or pound sterling (MOGB LN), on Deutsche Borse in euros (GMVM GY), on SIX Swiss Exchange in Swiss francs (MOAT SW) and on Borsa Italiana in euros (MOAT IM).