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Germany ETFs Setting the Pace in Europe


The German equity market has risen roughly in line with the broader European equity benchmarks, and has noticeably outperformed in the trailing one year period.

Relevant ETFs here are EWG (iShares MSCI Germany, Expense Ratio 0.51%) and IEV (iShares S&P Europe 350, Expense Ratio 0.60%), and we are seeing some evidence of profit taking in EWG among institutional holders.

The ETF has seen approximately $130 million leave the fund in recent sessions via redemption activity as the ETF is currently trading at its highest levels since late summer in 2011.

To put it in context, EWG has a total AUM figure of approximately $4.1 billion, so some could argue that recent flows are insubstantial in the grand scheme of things.

Top holdings in EWG round out as the following: Siemens AG (9.24%), BASF SE (8.90%), Bayer AG (8.21%), SAP AG (7.57%), and Allianz SE (6.53%), and there is clearly a “large cap” slant in the portfolio composition here with about 60% of the portfolio being classified as “mega cap” and about 29% qualifying as large cap.

EWG debuted back in 1996, making it an ETF veteran of some sort, and the “space” has matured nicely as far as offering alternatives to EWG in terms of exposure and portfolio compositions via varied index methodologies.

EWG is the giant in the space currently in terms of AUM, and there are three other equity based funds that are tiny in terms of assets under management (none of them have north of $8 million currently) and the oldest of the three is still under two years old (GERJ, Market Vectors Germany Small Cap, Expense Ratio 0.55%).

The others are FGM (First Trust Germany AlphaDEX, Expense Ratio 0.80%) and EWGS (iShares MSCI Germany Small Cap, Expense Ratio 0.59%).

All three of these equity based ETFs have low levels of average daily trading volume (and low asset bases as we have mentioned), so it is fair to say that portfolio managers looking for exposure to Germany have largely still not “discovered” the space outside of the seasoned EWG and its large cap exposure.

However, as portfolios become more specialized and developed, we have little doubt that these funds will grow in time as portfolio managers continue to adapt to new tools available (in this case refining large versus small cap exposure to a particular European country), and really zero in on desired exposure.

iShares MSCI Germany


For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.