WisdomTree Investments is launching the WisdomTree India Earnings Fund, the first exchange-traded fund to offer pure exposure to local Indian securities rather than through American Deposi
WisdomTree Investments is launching the WisdomTree India Earnings Fund, the first exchange-traded fund to offer pure exposure to local Indian securities rather than through American Depositary Receipts, on the NYSE Arca electronic market on Friday, February 22.
The fund will select from a universe of around 150 profitable companies included in the WisdomTree India Earnings Index on the annual index screening date, with the composition weighted by earnings rather than market capitalisation. WisdomTree believes that fundamentals-weighted products reduce the potential risks it says are associated with investing in emerging markets through market capitalisation-weighted indexes.
‘Launching this fund represents an important milestone for the ETF industry,’ says WisdomTree chief executive. ‘Investors have been increasing their allocations to India, but they have not yet had an ETF that provides direct exposure beyond the limited universe of American Depositary Receipts.
‘WisdomTree has gone to great lengths to ensure that we are offering a solution in the ETF structure designed to address recent regulatory actions, both by the Internal Revenue Service and Indian regulators, that have impacted the exchange-traded note structure and derivatives linked to Indian equity securities.’
PowerShares Capital Management, an Invesco subsidiary that specialises in exchange-traded funds, has also announced plans to list the PowerShares India Portfolio this month on NYSE Arca. Like the WisdomTree India Earnings Fund, the PowerShares India Portfolio will offer direct exposure to the country by owning local equities.
The iPath MSCI India Index ETN, which has some USD1.1bn in assets under management, has experienced significant fluctuations in its value relative to the benchmark it tracks, the MSCI India Total Return Index, following rule changes introduced last October by the Securities and Exchange Board of India, the country’s financial market regulator.
The SEBI required all foreign investors to register with it and ruled that participatory notes, including ETNs, could no longer be based on derivatives by foreign institutional investors, preventing the iPath MSCI India Index ETN, which does not hold shares or other securities, from issuing new shares to investors.
WisdomTree Trust is a Delaware statutory trust registered as an open-end investment company with the SEC, of which each WisdomTree ETF is a separate portfolio. As of the beginning of January, assets under management in the WisdomTree Trust totalled more than USD4 billion.