GlobalShares, a division of London based Old Mutual, launched the FTSE Developed Countries Ex-U.S. Fund (GSD) on Thursday, doubling the size of its ETF product line. GSD will track the FTSE Developed ex-U.S. Index, a benchmark already covered by the Schwab International Equity ETF (SCHF). The new GlobalShares ETF will also compete with the iShares MSCI EAFE Index ETF (EFA) and the Vanguard Europe Pacific ETF (VEA), both of which track the MSCI EAFE Index and hold a combined $41 billion in assets.
The FTSE Developed ex-US index is composed of over 1,300 securities, heavily weighted towards large (85%) and mid (15%) cap stocks, providing coverage of 23 developed markets excluding the U.S. The index has significant allocations to Japan (22%), the United Kingdom (18%), and France (10%), with large individual weightings towards European firms such as Nestle (1.7%), BP (1.7%), and Total (1.5%). While the MSCI EAFE Index also has significant weightings towards Western Europe and Japan, the FTSE Developed ex-US index includes a large weighting to Canada (6.9%), something that is missing from the MSCI indexed funds.
This launch marks the second ETF for GlobalShares, following the introduction of the GlobalShares FTSE Emerging Markets Fund (GSR) in December. GlobalShares made a splash with GSR by offering the fund expense-free until January 31. GSR now charges an expense ratio of 0.35%, as does the new developed markets fund. GlobalShares faces an uphill battle in convincing investors to achieve developed markets exposure through GSD instead of SCHF, the Schwab ETF that tracks the same index at less than half the cost.
Old Mutual is expected continue its push into the ETF this year, as the company has registered several international ETFs that are currently in registration and awaiting SEC approval. The three new funds will all charge between 35 and 50 basis points in expenses and could hit the market by the end of March.
Disclosure: No positions at time of writing.