ETF Showdown: An Overdue Polish Tussle

Last year, iShares, the world's largest ETF manager, rolled out several emerging markets ETFs that were a departure from the norm for the firm in that several of these funds were not first-to-market. One of the reasons iShares has accumulated more ETF assets under management than any other firm is because it has been first-to-market with emerging markets fare for Brazil and South Korea, just to name a couple of popular emerging markets, allowing the firm to develop massive AUM leads over its rivals that decide to encroach upon territory iShares arrived at first. With some of its 2010 introductions, iShares took a copycat approach and one of its targets appeared to be Van Eck's Market Vectors ETF business. One of those funds that looked like it could be a thorn in the side of a previously existing Market Vectors ETF was the iShares MSCI Poland Investable Market Index Fund EPOL, which goes head-to-head with the Market Vectors Poland ETF PLND in this week's “ETF Showdown.” To Poland's credit, it has held up very well in comparison to other European nations, particularly the PIIGS, and that may be by virtue of the facts that Poland has emerging markets designation and is not a member of the European Union. Still, when EPOL made its May 2010 debut, there was some criticism from the peanut gallery, wondering if it was really necessary to have two Poland-specific ETFs. Well, apparently there is room for both. PLND has accumulated $78.4 million in AUM since its November 2009 debut while EPOL has attracted a very impressive $303.9 million in just 13 months of trading. Answering why the AUM chasm between the two ETFs is so wide is easier said than done. Financials and energy account for over 54% of both ETFs' weights. The top-10 holdings of both funds show plenty of duplication, though with different weights and the expense ratios are comparable at 0.61% for EPOL and 0.6% for PLND. Alright, so that statistical review hasn't explained why EPOL has a dominant AUM lead, nor does it tell us which ETF is actually better. Average daily volume doesn't really do the trick either as EPOL has average daily turnover of 43,000 shares while PLND sees an average of 38,000 shares a day change hands. The devil is deeper in the details. EPOL holds 63 stocks compared to 27 for PLND, giving the former broader exposure to the Polish economy. Not to mention, EPOL is up 40% in the past year compared to 34% for PLND. That's enough for us to declare EPOL the preferred Polish play.