It’s been another up and down week on Wall Street, as investors continue to digest mixed earnings and economic reports. Small cap stocks were hit particularly hard on Tuesday, with the Russell 2000 Index (IWM) falling 1.5% during the session. On the macro front, investors awaited minutes from the Federal Reserve’s April meeting [see Owning the Market Isn't As Easy As It Sounds].
In ETF news, last week investors welcomed yet another ETF first - Merk’s Gold Trust ( OUNZ ). The fund is designed to track the spot price of gold bullion, but gives investors the ability to trade shares in exchange for physical gold bullion. Last week, PowerShares also reported a new filing for a Multi-Strategy Alternative fund, an actively manged ETF that looks to minimize volatility in broad alternative asset classes while still providing investors with a strong return utilizing a long-short strategy.
On Wednesday, investors welcomed yet another fund from Deutsche Asset & Wealth Management.
Small Cap China A-Shares
The new Harvest CSI 500 China A-Shares Fund (ASHS) tracks the CSI 500 Index, which aims to track 500 small cap companies listed on the Shanghai and Shenzhen stock exchanges. ASHS is the first fund to offer U.S. investors access to the small-cap China A-Shares equity market.
The fund’s portfolio consists of about 500 individual holdings, with allocations nicely spread out across securities: no single stock receives more than a 1% weighting. Currently, ASHS allocates roughly 20% of total assets to energy equities and another 20% to industrials. Meaningful exposure is also given to materials, consumer discretionary, and telecommunication stocks [see Inside the Harvest CSI 300 China A-Shares Fund (ASHR)].
Like its large cap counterpart ASHR, ASHS does charge a relatively high fee; its expense ratio is 0.82%. Investors should note, however, that unlike most ETFs that offer exposure to China, ASHR and ASHS are the only funds to directly invest in A-shares. Because of regulations, the A-share market has been off limits to foreign investors, except for those granted a qualified foreign institutional investor (QFII) status. Because ASHR’s sub-advisor, Harvest Global Investments, has obtained a renminbi QFII (RQFII), the fund is able to hold physical A-shares instead of using swap agreements.
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Disclosure: No positions at time of writing.