ETF Showdown: Battle For Auto Supremacy

Throughout the years of rapid sector-specific expansion in the exchange traded products universe, one industry was always conspicuous by its absence: The automotive industry. Considering this is a key industry in the U.S. and in major developed economies such as Germany and Japan, the lack of an automotive ETF was, at the very least, noticeable. Still, the ETF sector craze brought investors everything from tech to industrials to consumer staples to medical devices to agribusiness and nearly everything in between before ETF issuers got around to introducing some cars plays. That changed in May when in the span of just a few days, First Trust introduced the First Trust Nasdaq Global Auto Index Fund CARZ and Global X returned serve with the Global X Auto ETF VROM. It is noteworthy that these two issuers would be the first pair to tap the automotive sector because they are part of what could be deemed a veiled, yet blooming ETF rivalry. Both First Trust and Global X have a made names for themselves by being first to market with some interesting concepts and the two are among the fastest growing firms in the ETF business. Not to mention, both are among the most prolific issuers of new ETFs this year. That makes for a fun “ETF Showdown” between CARZ and VROM, the only ETF destinations for investors craving auto exposure. Let's get started. Given that both funds are less than two months old, both have done an admirable job at attracting assets with CARZ checking in with $3.13 in AUM while VROM boasts $1.62 million. Home to 37 stocks, CARZ features an expense ratio of 0.7%. VROM wins on both fronts as it is home to 50 stocks and fees of 0.65%. Those aren't the only differences between these two ETFs. CARZ is an appropriate ticker for that ETF because it is exclusively devoted to companies that make cars. Daimler AG, Honda HMC, Hyundai, Toyota TM and Ford F are the top five holdings in CARZ. VROM is only marginally different with its top five as BMW makes an appearance and different weights are given to Toyota and friends, but VROM also offers exposure to parts suppliers such as Johnson Controls JCI, Goodyear Tire & Rubber GT and others. No such fare is found in CARZ. Oddly enough, both funds only offer scant exposure to GM GM. The largest U.S. automaker COMBINES for just 6% of the respective weights of CARZ and VROM. This is a tough Showdown to decide because it really depends on what an individual wants. If you want all cars, go with CARZ. If you want the added diversity of parts suppliers along with automakers, then VROM is the better bet. Overall, VROM's lower fees and superior emerging markets exposure (India's Tata Motors TTM, for example is found here, but not in CARZ) make it the winner of this week's Showdown.