ETF Showdown: Asian Battle, ex-Japan

As emerging markets ETFs have soared in popularity and number of offerings in recent years, an equally popular sub-trend has developed and that is the multi-country emerging markets ETF. Think about it: That's exactly what the iShares MSCI Emerging Markets Index Fund EEM, arguably the ETF that started it all when it comes to this genre, is. When it comes to ETFs focusing on Asian markets, another familiar subplot is the exclusion of Japan. That makes sense as most of Asia falls into the emerging markets category while Japan is certainly a developed market. The result is some nifty ETFs that have the phrase “ex-Japan” in their titles and we've got two squaring off against each other in this week's “ETF Showdown,” the WisdomTree Pacific ex-Japan Total Dividend Fund DND and the newly minted First Trust Asia Pacific ex-Japan AlphaDEX Fund FPA. FPA was part of the suite of new AlphaDEX international ETFs First Trust rolled out in April while DND is nearly five-years old. Obviously, the difference in age makes for a big difference in assets under management as DND has nearly $75 million in AUM, but FPA has done alright for itself, accumulating over $3 million in AUM in less than two months on the market. DND trumps its new rival when it comes to fees, sporting an expense ratio of 0.48% compared to 0.8% for FPA. There are other key differences to note as well. For example, DND is home to 122 stocks while FPA holds 99 stocks. An investor might find comfort in knowing DND is home to some familiar names such as BHP Billiton BHP, the world's largest mining mining company, China Mobile CHL and Cnooc CEO, China's third-largest oil company, but the ETF has a decidedly un-emerging markets feel to it. Australia accounts for almost 61% of the ETF's country weight and Hong Kong and Singapore combine for another 37%. On the other hand, FPA is almost 38% allocated to South Korea, which is still classified as an emerging market. Australia and Singapore combine for over 25% of the ETF's weight while Hong Kong gets the remaining allocation. Another note of caution regarding DND: It is heavily weighted to financials, as in the sector accounts for over 38% of the ETF's weight. Only industrials and telecom names also get double-digit allocations in DND. Financials also top FPA at over 28%, but consumer discretionary, materials and industrials receive weights ranging from 14% to 19.1%, so FPA is a bit more diverse at the sector level. So where does that leave us? With a rare “ETF Showdown” draw. FPA is the better bet considering its superior sector allocation and better emerging markets feel, but we cannot ignore DND's lower fees and a distribution yield of almost 3%.