Global X Joins Auto ETF Race

by on March 25, 2011 | ETFs Mentioned:

Global X, the New York City-based ETF issuer known for its various country and sector-specific products, continues to be active on the product development front; the firm recently filed details with the SEC for two new niche ETFs. The filing was light on details such as tickers or expenses, but did shed some light on two ideas unlike any ETF currently on the market:

Global X Global Auto ETF

This proposed product would seek to track the S-Network Global Automotive Index, a rules based benchmark indented to give investors a way to track the overall performance of a global universe of listed companies engaged in the automobile industry. The index uses a modified capitalization weighted, float adjusted methodology and consists of publicly traded companies engaged in the production of autos, auto parts, tires and related activities that have a market capitalization of at least $3 billion. The benchmark includes all companies worldwide that are principally engaged (derive greater than 50% of revenues from sources listed above) in the automobile industry [read Dude, Where's My Car ETF?].

Global X Farming ETF

This fund would track the Solactive Global Farming Index, a global benchmark designed to measure broad based equity market performance of global companies involved in the farming industry. Components include companies globally that are primarily engaged in agriproduct or livestock operations or in the manufacture, sale or distribution of farming products. The index would include a single company cap to avoid big concentrations in a single stock [see all the Agribusiness ETFs].

There isn’t currently an ETF dedicated exclusively to the automotive industry, though Direxion has filed for approval of a fund that would target a similar industry. The introduction of such a product would seem like a logical addition to the current lineup of ETF products, especially as car ownership rates in the developing world continue to climb and the industry appears to have recovered from the events of recent years that pushed several companies to the brink of bankruptcy (and, in fact, pushed some over the edge). 

The agribusiness/farming ETF space is a bit more crowded. In addition to the Market Vectors Agribusiness ETF (MOO), which has amassed more than $3.5 billion in assets, the PowerShares Global Agriculture Fund (PAGG) and the Jefferies TR/J CRB Global Agricultural Fund (CRBA) offer opportunities to invest in companies engaged in the agricultural business. Additionally, the newcomer to the space, the Index IQ Global Agribusiness Small Cap Fund (CROP), debuted very recently and offers unique exposure to small cap agribusiness firms.

If the proposed farming ETF gets closer to market, it will be interesting to see how the components stack up to existing products. Many of the components of existing agribusiness ETFs are not directly involved in farming; major components of MOO include fertilizer producer Potash and machinery manufacturer Deere & Co.

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Disclosure: No positions at time of writing.