From the June 2008 issue of Research Magazine • Subscribe!

June 1, 2008

Foreign Debuts on the Upswing

The number of foreign-market ETFs continues to expand as investors look to diversify their portfolios away from U.S. stocks.

Barclays Global Investors (BGI) launched five new iShares international exchange traded funds (ETFs) in April. Among the new funds are the iShares MSCI Israel, Thailand and Turkey index funds. These are the first ETFs to cover those particular markets. Also launched is the iShares MSCI ACWI (All Country World Index) and MSCI ACWI ex-US Index Funds. Both ETFs provide broad global exposure with benchmarks that are widely used and highly regarded by institutional investors.

"While international investing has become nearly commonplace, many U.S. investors remain heavily weighted in domestic securities," said Noel Archard, head of U.S. iShares Product Development. "Non-U.S. markets account for approximately 57 percent of the world's equity market capitalization and performance of these markets continues to differ from the U.S. market."

Archard added, "These new ETFs will help investors who wish to access both broad or narrow exposures to global equities do so in one cost-efficient trade. Investing in emerging market countries offers investors attractive diversification benefits relative to single stock investments, and our new ACWI-based offering will nicely round out the excellent coverage we provide across broad-based international investments."

In related news, six single-country ETFs were launched by Northern Trust Global Investments. The funds are branded as "NETS" ETFs and will track Australia (AUS), France (FRC), Hong Kong (HKG), Germany (DAX), Japan (TYI) and the United Kingdom (LDN). The Northern Trust ETFs will track recognized stock benchmarks like Germany's DAX, Hong Kong's Hang Seng and the U.K.'s FTSE 100 index.

Northern Trust's funds will follow some of the same countries covered by the iShares but with competing market indexes and lower expense ratios. Barclays recently reduced the expense ratios on many of its country ETFs to 0.51 percent. According to the prospectus, the NETS country ETFs will charge 0.47 percent. Northern Trust is also planning ETFs that cover other market segments. It's the Chicago-based bank's first foray into the ETF marketplace.

"The Amex is proud to support Northern Trust in bringing their first family of funds into the ETF marketplace," said Scott Ebner, senior vice president of the Amex ETF Marketplace. "These NETS ETFs are linked to established and globally-recognized indexes."

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