WisdomTree Investments, Inc. (NASDAQ: WETF), the fifth-largest U.S. issuer of exchange-traded funds, expanded its already substantial lineup of international ETFs Thursday with the introduction of three new funds.
For investors looking for a dedicated play on the ongoing recovery in eurozone local economies and equity markets, the debut of the WisdomTree Europe Local Recovery Fund (BATS: EZR) could be well timed.
With ETFs such as the WisdomTree Inter Hedged Eq Fund (NYSE: HEDJ), this year's top asset-gathering ETF, and the WisdomTree Europe SmallCap Div Fd (ETF) (NYSE: DFE), New York-based WisdomTree is already an established, trusted name when it comes to Europe ETFs.
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The Appeal Of EZR
EZR adds to that appeal, and like HEDJ, EZR features a eurozone revenue screen.
In the case of the new ETF, companies held by EZR “derive more than 50 percent of their revenue from Europe. The Fund seeks to maximize exposure to European companies that may benefit from Europe’s economic recovery and Europeans’ increased buying power,” .
EZR's Exposure And Allocation
Although many investors believe the recovery in eurozone stocks has been facilitated by the weaker euro, what has gone overlooked by international investors are improving local consumption trends; so, the eurozone recovery story is more localized than some market participants believe. EZR is levered to that trend with a 21.3 percent weight to consumer discretionary stocks, the new ETF's third-largest sector weight.
Consumer staples, healthcare, telecom and utilities stocks are purposefully excluded from EZR because, , those sectors are among the least correlated to the eurozone recovery story.
“Currently, the sector leading growth in the European economy is local consumption and local demand, not global trade. EZR provides more direct exposure to these European focused businesses. Moreover, typically cyclical sectors have exhibited stronger performance during economic recoveries than their defensive counterparts. EZR is designed with this in mind, including exposure to the six sectors most tied to the cyclical growth potential of the European economy,” said WisdomTree Research Director Jeremy Schwartz .
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The Index And Eurozone Economic Heft
EZR follows the WisdomTree Europe Local Recovery Index (WTELR), a benchmark that allocates over 83 percent of its combined weight to large- and mid-cap stocks. The index reflects where eurozone economic heft lies, as France, Germany and Italy combine for about two-thirds of its weight. In order, Germany, France and Italy are the eurozone's three largest economies.
EZR's combined exposure to the PIIGS nations is about 30 percent, though the new ETF features no exposure to Greece due in part to the fact that Greece is classified as an emerging market.
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