VanEck has announced changes to two single-country emerging market ETFs listed on NYSE Arca.
Effective 1 May 2020, the funds will offer a fundamentals-based approach to investing in Chinese and Indian equities.
Effective 1 May 2020, the funds, which currently track market-cap-weighted equity indices on Chinese large-caps and Indian small-caps, will switch to new indices offering a fundamentals-based approach.
The new indices will be provided by MarketGrader, an independent equity research and indexing firm, and will target strong companies with long-term growth potential that are priced at reasonable valuations.
MarketGrader is also known as the co-creator of the $100m Barron’s 400 ETF (BFOR US), in partnership with prominent US financial journal Barron’s, which invests in US equities and also utilizes a ‘growth at a reasonable price’ (GARP) strategy.
Ed Lopez, Managing Director, Head of ETF Product at VanEck, commented, “Investors often seek to invest in emerging markets in order capture the growth potential of those economies but we believe that the investor risk and return experience may be improved over broad benchmarks through a selective approach that considers the growth, value, and quality characteristics of a company.
“VanEck has been investing in emerging markets for nearly 30 years. Given that it values growth at a reasonable price, this new index methodology aligns well with VanEck’s active management investment philosophy. We are happy to be able to provide investors access to this new index approach in a cost-efficient ETF.”
The funds
The $50m VanEck Vectors ChinaAMC CSI 300 ETF will be renamed the VanEck Vectors China Growth Leaders ETF (GLCN US). The fund will switch from tracking the CSI 300 Index to the MarketGrader China All-Cap Growth Leaders Index.
Meanwhile, the $70m VanEck Vectors India Small-Cap Index ETF will be renamed the VanEck Vectors India Growth Leaders ETF (GLIN US). The fund will switch from tracking the MVIS India Small-Cap Index to the MarketGrader India All-Cap Growth Leaders Index.
The China and India ETFs will remain listed on NYSE Arca and will continue to offer expense ratios of 0.60% and 0.83% respectively.
New methodology
The new China index will select its constituents from the universe of China-domiciled firms with market capitalizations greater than $200 million, regardless of listing venue.
The India index will select its constituents from the universe of Indian-listed stocks with market capitalizations above $150 million.
Each index will assign each constituent within its investable universe with a GARP score based on MarketGrader’s proprietary rating system which uses a combination of 24 fundamental indicators. The factors span growth, value, profitability, and cash flow.
The China index will select the 200 highest-ranked companies, while the India index will select 80 firms. Constituents will be weighted by float-adjusted market capitalization subject to a single stock cap of 5% and a sector limit of 20%.