Would it not be nice to be able to invest in one ETF that covers the entire world? Now you can, as IndexUniverse suggests in “Rydex launches All-World ETF:”
Rydex, the Rockville, Md.-based fund sponsor known for its flagship equal-weight S&P; 500 ETF, has launched a new equally weighted fund designed to measure the equity market performance of both developed and emerging economies.
The Rydex MSCI All Country World Equal Weight ETF (NYSEArca: EWAC) tracks the equal-weighted MSCI All County World Index, which comprises more than 2,400 stocks from 24 developed and 21 emerging market countries, according to the company’s fact sheet. The fund’s components are rebalanced quarterly to maintain the equal weighting.
EWAC’s focus is on large-cap firms; the median market capitalization of companies in the MSCI ACWI Equal Weighted Index is $11.3 billion.
Equal weighting—as opposed to weighting by market capitalization—is an alternative approach to indexing that’s increasingly attracting the attention of both investors and fund sponsors. As of late October, the Rydex S&P; Equal Weight ETF’s (NYSEArca: RSP) year-to-date returns were more than twice as much as its market cap-weighted counterpart, the SPDR S&P; 500 ETF (NYSEArca: SPY).
According to Rydex portfolio strategist Tony Davidow, the quarterly rebalancing provides a quasi-active component to his firm’s equal weighted funds and may be part of the secret of their relative outperformance.
“We’re essentially selling the winners high and buying the underperformers low,” said Davidow.
In addition, Rydex believes equal weighting helps reduce risk.
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EWAC has an expense ratio of 0.60 percent. The fund began trading Jan. 12 on the New York Stock Exchange’s Arca platform with a relatively large bid-ask spread of around $0.27. Buyers were prepared to pay $40.12 a share, while sellers were at $40.39, according to data posted on Yahoo finance.
While I like the idea of having the option of investing in an all-world ETF, EWAC is too new to be considered investment material.
As always, I like to first see 9 months of price data to be able to chart a trend, substantial volume increase and much improved bid/ask spreads before I would even consider this new arrival. Nevertheless, it’s a step in the right direction, and I will report on the progress this ETF has made in a few months.
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