EWAC: The Whole World, Equally Weighted

Following up on last month's launch of five new equal weight ETFs, Rydex yesterday (1/12/11) introduced the Rydex MSCI All Country World Equal Weight ETF (EWAC).  The new fund seeks to track, before fees and expenses, the price and yield performance of the MSCI All Country World (ACWI) Equal Weighted Index.

The underlying index consists of 2,409 stocks from 45 country indices representing 24 developed and 21 emerging market countries.  Current holdings consist of Rydex MSCI EAFE Equal Weight ETF (EWEF) 39.3%, Rydex MSCI Emerging Markets Equal Weight ETF (EWEM) 32.1%, and 626 individual stocks of the US and Canada representing the 28.6% of the world's stocks not covered by the other two ETFs.

EWAC claims an expense ratio of 0.60%, which initially appears to be a mathematical challenge given the expenses of the ETFs within EWAC.  The acquired fund fees for EWEF (0.55% expense ratio) and EWEF (0.70% expense ratio) equal 0.216% and 0.225% respectively at their current allocations, totaling 0.44% at the portfolio level.  The remaining 0.16% of the total expense ratio only has to cover 28.6% of the portfolio, which equates to a 0.56% ratio if it were the entire fund.  Therefore, the 0.60% for EWAC is achievable after all, without Rydex having to spell out the acquired fund fees like many Funds of Funds (ETFs of ETFs) do.

The whole world, from an equally weighted perspective, looks like an entirely different place from the traditional capitalization weighted view.  The process yields country weightings of US 24.4%, Japan 13.2%, China 5.2%, Taiwan 4.9%, UK 4.4%, Canada 4.2%, South Korea 4.1%, and others 39.6%.  The resulting sector weighting is Financials 21.4%, Industrials 15.7%, Consumer Discretionary 13.0%, Materials 11.5%, Technology 9.7%, Consumer Staples 7.5%, Energy 6.8%, Health Care 5.3%, Utilities 5.2%, and Telecommunications 3.8%.

Additional information is located in the press release (pdf), product overview, and EWAC fact sheet (pdf).

Disclosure covering writer, editor, and publisher:  No positions in any of the securities mentioned.  No positions in any of the companies or ETF sponsors mentioned.  No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.