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4 New iShares ETFs Hit the Market

Zacks Equity Research

iShares, the largest ETF issuer in the world, already has a wide ranging lineup of funds targeting a variety of asset classes, including domestic and foreign stocks, bonds, and commodities. Lately though, the issuer seems to be beefing up its already-huge portfolio in order to give further access to investors in the international equities, fixed-income and dividend investing spaces.

Four new iShares ETFs including iShares Core MSCI Europe ETF (IEUR), iShares Core MSCI Pacific ETF (IPAC), iShares Core Dividend Growth ETF (DGRO) and iShares Core Total USD Bond Market ETF (IUSB) hit the market on June 12. We have highlighted briefly below these new funds for investors seeking different options in these interesting markets (read: Who Wins the 2014 World Cup of ETFs?).

iShares Core MSCI Europe ETF

This ETF plans to track the MSCI Europe Investable Market Index. The 848-stock fund looks to offer exposure to 15 developed European nations taking into consideration large, mid, or small capitalization companies. The fund is heavy on U.K. with more than one-fourth of exposure followed by France (14.1%) and Switzerland (13.5%).

Among the sectors, financials takes the top spot with more than one-fifth of focus. The fund is devoid of company-specific concentration risk with no stock accounting for more than 2.38% of the portfolio. The fund charges an expense ratio of 14 bps a year (read: SPDR Launches European Small Cap ETF: SMEZ).

This ETF could be appropriate for investors who seek to have a European flavor in their portfolio. Europe spurred optimism among investors since Euro zone returned to growth in second half of last year.

Though deflationary worries started to pose threats to Euro area growth, the recent historic move by ECB to introduce negative rates in order to compel banks to lend more to credit-famished businesses should support the region’s growth story.

For competition, this fund will look to be up against numerous ETFs. The space is teeming with products with specific country ETFs and broad-based ETFs. Vanguard FTSE Europe ETF (VGK), iShares MSCI EMU Index Fund (EZU), SPDR DJ EURO STOXX 50 ETF (FEZ) and iShares S&P Europe 350 Index Fund (IEV) are some of the billion-dollar funds ruling the Europe equities space.

iShares Core MSCI Pacific ETF

By tracking the MSCI Pacific Investable Market index, this ETF proffers exposure mainly to five nations namely Australia, Hong Kong, Japan, New Zealand, and Singapore. The focus will be across capitalization levels. The fund is weighted heavily towards Japan, as that country makes up more than 60% of the portfolio trailed by Australia (23%).

Sector-wise, again financials stays at the peak with more than 30% of the fund. Industrials (16.6%) and consumer discretionary (16.2%) round out the top three sectors. This ETF also does not have much concentration risk with the highest allocation of 3.09% going to Toyota Motor. Expense ratio is low at 14 bps a year.

This ETF would be a fit for investors intending to land on developed Asian markets with a tilt toward fast recovering Japan – another developed nation which came out of long stretch of deflation armed by massive monetary easing last year (Nikkei soared more than 50% in 2013).

That’s not all; with better-than-expected Q1 GDP reported recently and continuation of supportive policies, the Japanese stock markets are headed for a longer run higher. Other nations that the fund is invested in are also better-placed in Asia-Pacific bloc.

In terms of competition, the Asia Pacific ETF space is also packed with products. However, the most prominent funds are with exclusive of Japan. On that account, the newly launched fund should taste success. However, Vanguard FTSE Pacific ETF (VPL) and iShares Asia / Pacific Dividend 30 Index Fund (DVYA) can be considered as potential threat though DVYA is heavy on Australia and has very low focus on Japan.

iShares Core Dividend Growth ETF

This ETF targets the dividend paying large cap companies of the U.S. by following the Morningstar US Dividend Growth Index. Stocks with consistent track record of hiking dividends are normally eligible for inclusion in the index.

Sector-wise, industrials, consumer goods and consumer services turned out as top three investments. Company-wise, Exxon Mobil gets the highest allocation with about 3.11% of focus. The fund charges 12 bps in fees.

Though the U.S. stock market bounced back from the severe winter this year, economic numbers coming out are still mixed and investors are falling more and more value sensitive. Bond yields remained which sharpened the appeal for dividend investing.

In terms of competition, SPDR S&P Dividend ETF (SDY) which also considers stocks having a long history of raising dividend payments (read: Dividend ETFs Explained: What Investors Need to Know).

iShares Core Total USD Bond Market ETF

The fund focuses on higher-yielding bond categories by following the Barclays U.S. Universal Index. The fund offers more widespread approach to the U.S. bond market which includes high yield and emerging market bonds producing higher yield than the investment-grade bonds.

The fund also targets the intermediate part of the yield curve with an effective duration of about 5.08 years. Holding about 284 bonds in its portfolio, it charges 15 bps in fees. Thanks to the rock-bottom interest rates prevailing in the market, investors looking for all kind of income-generating investing avenues (read: Top-ranked Corporate Bond ETF in Focus: VCLT).

The fund hails from the total bond market category. The crowded space is presently headed by the likes of Vanguard Total Bond Market ETF (BND), iShares Core U.S. Aggregate Bond ETF (AGG) and Vanguard Intermediate-Term Bond Index Fund (BIV). All charge lower than IUSB. Still, we expect the newly launched ETF to see its share of success as all the afore-mentioned ETFs are unique in terms of duration and holdings.

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Read the analyst report on IEUR

Read the analyst report on IPAC

Read the analyst report on DGRO

Read the analyst report on IUSB

Read the analyst report on VGK

Read the analyst report on VPL

Read the analyst report on SDY

Zacks Investment Research

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