State Street Planning Emerging Markets Dividend ETF

by on November 27, 2010 | ETFs Mentioned:

Frustrated with the diminishing prospects for growth in the developed world, investors have flocked en masse over the last two years towards red hot emerging markets that now account for the vast majority of global GDP growth. As interest in emerging markets equities has jumped, so too have the options for U.S. investors looking to gain exposure to this asset class. While the two ETFs linked to the large cap-heavy MSCI Emerging Markets Index–iShares EEM and Vanguard’s VWO–are by far the largest (aggregate assets exceed $85 billion), a torrid stretch of product development in the space has afforded investors a number of more targeted options.

EG Shares and Global X have been pioneers in sector-specific emerging markets ETFs, including the ultra-popular Emerging Markets Consumer ETF (ECON) and China Consumer ETF (CHIQ). There are now a number of ETFs focusing exclusively on small cap stocks in emerging markets–including China (ECNS, HAO), Brazil (BRF, EWZS), and India (SCIN, SCIF)–as well as country-specific ETFs dedicated towards smaller and more obscure emerging market economies such as the Philippines and Colombia (EPHE, GXG).

State Street was a bit of a latecomer to the emerging markets scene–it launched its first emerging markets equity ETFs in 2007, almost four years after EEM debuted–but the company has had some success in more targeted areas of the space. The SPDR S&P Emerging Markets Small Cap ETF (EWX), for example, is one of the only funds to offer multi-region exposure to emerging market small caps and has accumulated more than $1 billion in assets [see Seven Considerations For Emerging Markets ETF Investors].

Now State Street is looking to beef up its emerging markets lineup, recently filing details on a local currency debt fund and now seeking approval for the SPDR S&P Emerging Markets Dividend ETF. The proposed fund would track the S&P Emerging Markets Dividend Opportunities Index, a benchmark that consists of 100 of the highest yielding emerging markets stocks. Historically, the index has included allocations to Brazil, Chile, China, the Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

Existing Offerings

The proposed fund would be similar to an existing WisdomTree ETF; the Emerging Markets Equity Income Fund (DEM) is linked to a dividend-weighted index consisting of the highest dividend-yielding stocks in Brazil, Taiwan, Turkey, and more than a dozen other developing economies. The benchmark underlying DEM has a dividend yield of close to 6%. WisdomTree also offers a Emerging Markets SmallCap Dividend Fund (DGS) that includes dividend-paying stocks listed in developing markets; the dividend yield on the index to which that ETF is linked is about 5% [see more on DGS' fact sheet]. By comparison, dividend yields for EEM and VWO are generally less than 2%.

No expense ratio or ticker symbol were included in the filing.

[For updates on all new ETF launches, sign up for our free ETF newsletter].

Disclosure: No positions at time of writing.