Market Vectors, Van Eck Global’s exchange-traded fund unit, filed regulatory paperwork with the Securities and Exchange Commission to put into registration an equities ETF focused on Israel, which will make it the second such fund on the market.
The Market Vectors Israel ETF will trade under the symbol “ISRA” and will have a net annual expense ratio—including a fee waiver—of 0.59 percent, or $59 for each $10,000 invested, according to the filing . The fund will be based on an index created by BlueStar Indexes.
ISRA will join the iShares MSCI Israel Capped Investable Market Index Fund (EIS), a five-year-old ETF that now has $83.4 million in assets. While investing in Israel may give investors pause, the Middle Eastern country has long had a reputation of economic dynamism and capitalist success that belies the turmoil it sometimes finds itself embroiled in.
The fund’s prospectus took some of those concerns head-on in the section on unique risks the fund poses to investors.
“Israel’s relations with the Palestinian Authority and certain neighboring countries such as Lebanon, Syria and Iran, among others, have at times been strained due to territorial disputes, historical animosities or security concerns, which may cause uncertainty in the Israeli markets and adversely affect the overall economy, “ the prospectus said.
The filing also said that Israel’s economy depends on imports of certain key items, such as crude oil, coal, grains, raw materials and military equipment. Furthermore, Israel’s economy is heavily dependent upon trade relationships with key counterparties around the world.
“Any reduction in these trade flows may have an adverse impact on the fund’s investments,” the filing said.
ISRA’s index provider will consider factors such as domicile, country of company formation/founding, primary location of management, operations and/or research and development facilities, tax status, location of revenues and employees to determine whether a company will be included in the index.
The fund’s investments will include depositary receipts, and as of March 1, 2013, the index included 94 securities of companies with a market capitalization range of between approximately $133 million and $35.1 billion, and an average market capitalization of $1.9 billion.
At least 80 percent of the fund’s assets will normally be invested in the index—a policy that is nonfundamental and may be changed without shareholder approval upon 60 days’ prior written notice to shareholders, according to the filing.
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