Global X Challenges Competition With Latest ETF Filing (REMX, MOO)

Global X, the New York City-based ETF issuer best known for its suite of emerging market ETFs, is continuing the expansion of its product lineup with a new filing with the SEC. In the document, the company outlined plans for several new funds that look to further slice up the stock market in very specific ways. While details remain scarce– no information regarding the funds’ tickers or expense ratios were released– we have highlighted some of the main details from the filing below:Most of the new fund proposals target very specialized sectors of the stock market that have gained huge followings in months past. These new ideas include funds targeting the; Fertilizer/Potash Industry, a Rare Earth Metals Fund and a Strategic Metals Fund as well. All three of these sectors have seen investment interest skyrocket thanks to concerns about supplies in the metal industry and droughts and other types of adverse weather impacting the agribusiness market.

First up is the company’s Fertilizer & Potash ETF which will seek to track the Solactive Global Fertilizers/Potash Index. This index follows the performance of the largest and most liquid listed companies globally that are active in some aspect of the fertilizer industry. The index is calculated as a total return index in USD and adjusted semi-annually. The stocks are screened for liquidity and weighted according to free-float market capitalization. Additionally, a specific capping methodology is used at the time of the index review to seek to assure compliance with the rules governing the listing of financial products on exchanges in the United States. The index is maintained by Structured Solutions AG, the company that provides the vast majority indexes for Global X’s products [see all the Global X ETFs].

Meanwhile, the mining-focused funds will also track indexes provided by Structured Solutions AG. The rare earth metal fund will track a benchmark that intends to measure broad based equity market performance of global companies primarily involved in the rare earths industry. The index company defines the ‘rare earth’ market as the following 17 elements on the periodic table; scandium, yttrium, lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium and lutetium.  While these aren’t exactly household names, the metals are extremely important to everyday life and make their way into a number of high tech applications. These uses include; cellular phones, high performance batteries, flat screen televisions, green energy technology, as well as hybrid and electric cars, high-tech military applications and superconductors and fiber-optic communication systems.

The strategic metal fund follows a similar index but instead tracks ‘strategic metals’ or ones that have ‘special economic importance’ with great supply risks. These metals currently include; antimony, beryllium, cobalt, fluorspar, gallium, germanium, graphite, indium, magnesium, niobium, tantalum, tungsten, tellurium, magnesite, molybdenum, chromium, selenium, vanadium and bauxite. Many of these metals are less obscure than their counterparts in the rare earth metal segment but are crucial to the world nonetheless. Bauxite, for example, is a critical component of aluminum production while graphite makes its way into a number of applications ranging from pencils to steel [Will Toyota’s Plans Sink Strategic Metal ETFs?].

International Focused ETFs

Additionally, the company is continuing to beef up its offering of international ETFs as well with the proposals for a SuperDividend Fund and a Canada Preferred ETF, both of which will also track indexes provided by Structured Solutions AG. The Canadian fund, which will track the Solactive Canada Preferred Stock Index, seeks to follow a select group of preferred stocks from Canadian issuers trading on the Toronto Stock Exchange. The index has several criteria in place to make sure only the most liquid and highest quality preferred stocks make it into the index.  A specific capping methodology is used at the time of the semi-annual index review to seek to assure compliance with the rules governing the listing of financial products on exchanges in the United States. The filing noted that the product is likely to be concentrated in financials but any investor that has bought preferred stock should not be surprised by this at all [see Five Ultra Concentrated ETFs].

The final fund detailed in the filing, the SuperDividend Fund, which tracks the Solactive Global SuperDividend Index, looks to follow the performance of a selected group of companies that rank among the highest dividend yielding equity securities in the world.  The companies are equally weighted subject to maximum concentration limits by industries and regions, to ensure that no one segment has an undue influence on the fund. The index will also apply filters to eliminate those companies that are most likely to cut their dividends, in order to make sure that the yield stays as high as possible while still being realistic. Although in-depth holdings data was not available at this time, the filing did note that the product may become heavily dependent on financials and basic material companies since those are among the most likely to pay out robust dividends to investors, especially in less developed markets.

Change In Strategy?

Traditionally, Global X has been responsible for some of the most innovative products in the ETF industry bringing first to market funds in a variety of interesting investment niches. However, with this latest filing it looks as though Global X is now taking on some of the larger players in the industry by proposing competing products that look to directly take assets away from some issuers. One company that looks to be especially impacted by this strategy is Van Eck and their lineup of Market Vector-branded products. Van Eck currently has two products which look to battle head-on with three of the proposed Global X Funds, the Market Vectors Agribusiness ETF (NYSE:MOO) and the Market Vectors Rare Earth/Strategic Metals ETF (NYSE:REMX).

MOO tracks an index of companies involved in the business of agriculture and, as such, offers significant exposure to companies engaged in the production of fertilizer and potash. Three of the fund’s top five components are directly involved in either the fertilizer or potash industries so there looks to be significant overlap between Global X’s proposed fund and MOO. Meanwhile, in the metals market, REMX looks to be basically a combination of Global X’s two proposed products in the space. The difference of course being that Global X splits up the market into two groups; strategic in one and rare earth metals in the other. While it remains to be seen if investors are looking for further segmentation in either of these two popular spaces, the good news for Global X is that there is plenty of money to go around. REMX has accumulated over $400 million in just a few short months on the market while MOO has close to $4 billion in assets, suggesting that there is plenty of room in this space for another issuer seeking to bring additional choices to investors [Seven Popular ETF Tickers Every Investor Must Know].

Written By Eric Dutram From ETF Database   Disclosure: No positions at time of writing.

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