By Michael Johnston:
Global X, the firm behind a wide-ranging lineup of exchange-traded funds, announced this week the debut of two funds linked to NASDAQ indexes. The Global X NASDAQ 400 Mid Cap ETF (NasdaqGM:QQQM - News) will be linked to an index consisting of the top 400 mid-capitalization domestic and international non-financial securities listed on NASDAQ. The Global X NASDAQ 500 ETF (NasdaqGM:QQQV - News) will be linked to an index consisting of 500 of the largest domestic and international non-financial securities listed on NASDAQ.
The two new Global X ETFs will essentially offer additional depth to stocks traded on the NASDAQ; existing products such as the ultra-popular [[QQQ]] already focus on the 100 largest NASDAQ-listed companies, a list that is dominated by stocks such as [[AAPL]], [[MSFT]], and [[GOOG]]. The NASDAQ tends to be the preferred listing destination for tech companies, though firms in other sectors of the U.S. and international economies are certainly welcome as well. “We are pleased to be pairing with NASDAQ OMX, a recognized leader in the development of innovative indices, to bring these products to market,” said Bruno del Ama, CEO of Global X Funds. “Both new funds expand the coverage beyond the NASDAQ 100 Index, providing greater diversification and possibly capturing the next Apple or Google.”
Under The Hood
The largest holdings in QQQV will be Apple (11.6%), Microsoft (6.7%), and Oracle (NasdaqGS:ORCL - News) (4.8%). The broad-based NASDAQ fund, like QQQ, will feature a heavy tilt towards tech stocks; this sector represents about 60% of the underlying portfolio. The next largest allocation is to consumer discretionaries (17%), followed by healthcare (13%). No other sector makes up more than 5% of holdings [see QQQV fact sheet].
QQQM’s portfolio doesn’t feature many household names, but does offer considerably more balance than its top-heavy counterpart. No stock makes up more than about 1.5% of the mid cap fund, with the largest weightings going to Pharmasset and Perrigo Company. QQQM’s tech bias is also not quite as significant; tech stocks make up about 37% of holdings. Other sectors with big weightings include health care (22%), consumer discretionaries (18%), and industrials (10%) [see QQQM fact sheet].
The appeal of these new products may lie not in the securities that are included, but those that are excluded. Specifically, both underlying indexes avoid financial stocks–a corner of the market that has weighed heavily on many index-based equity products in 2011. Every member of the Financials Equities ETFdb Category has lost value in 2011, while most other sectors are actually up on the year.
WisdomTree also offers a couple of “financials free” ETFs; [[DTN]] has beaten the S&P 500 by a wide margin so far in 2011, while the International Dividend ex-Financials Fund (NYSEArca:DOO - News) is well ahead of products linked to the MSCI EAFE Index.
Both new NASDAQ ETFs will charge expense ratios of 0.48%. All Global X ETFs are available for commission free trading on the Interactive Brokers platform.
Disclosure: No positions at time of writing.
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