EGShares, an emerging markets sector exchange-traded fund provider, has launched an India small cap ETF, the first ETF that offers investors access to small capitalisation companies in the world’s largest democracy.
The Emerging Global Shares Indxx India Small Cap Index Fund invests in 75 publicly traded companies with market capitalisations between USD100m and USD2bb and is designed to track the performance of the Indxx India Small Cap Index.
“We’re very excited about launching the world’s first India small cap ETF,” says Robert Holderith, president and chief executive of EGShares. “We believe that until today, India exposure through ETFs has been limited and the offerings have been very similar. With almost zero overlap in holdings versus the current ETF offerings and a meaningfully different industry allocation, our fund attempts to provide exposure to some of the fastest growing companies in one of the world’s fastest growing economies.”
The Indxx India Small Cap Index is a 75 stock, free float adjusted market capitalisation index designed to measure the market performance of equities in the small cap sector of India. It has a mean free float market capitalisation of USD632m and the fund charges a net expense ratio of 0.85 per cent (gross expense ratio: 1.58 per cent).
The top five industry weights of the index as of 30 June were commercial banks (12.59 per cent), IT services (8.67 per cent), software (7.78 per cent), textiles, apparel and luxury goods (6.22 per cent), and metals and mining (5.95 per cent), followed by real estate management and development, food products, chemicals, media, and construction and engineering.
Richard Kang, chief investment officer and director of research at Emerging Global Advisors, says: “Investors are searching for returns in this time of great economic uncertainty and we believe that in developed markets, return expectations for capital appreciation of equities as well as fixed income and dividend yields are low, while correlations among core asset classes remain high. As a result we expect investors of all types to allocate more to emerging markets whether it’s through equity, fixed income or currency. One example is India, an emerging market economy that has grown at an impressive rate, expanding by about 8.5 per cent over the past five years.”