Checking In: A Third Wheel? (SCIF, SCIN, SMIN)

For all of January and most of February, ETFs tracking India were delivering performances that could only be characterized as stellar. Two of the ringleaders of the India ETF rally this year have been rival funds, the Market Vectors India Small-Cap ETF SCIF and the EGShares India Small Cap ETF SCIN. So impressive were the performances of SCIN and SCIF through the first six or seven weeks of this year that both ETFs were found to be outperforming a certain big name tech stock. So maybe it would seem as though there really is room for a third India small-cap ETF and investors got just that last month with the debut of the iShares MSCI India Small Cap Index Fund SMIN. Competition is usually a good thing and the iShares MSCI India Small Cap Index Fund provides it by virtue of having an expense ratio of 0.74% compared to 0.85% for SCIF and SCIN. Still, critics might argue that the new iShares offering is just another copycat fund from the world's largest ETF sponsor and that a needles India small-cap ETF menage trois has been created. After all, there aren't even three small-cap ETFs devoted exclusively to China or Brazil. Obvious issues for how well this troika of small-cap India ETFs can coexist are assets under management and volume. While SCIN and SCIF have proven popular in the sense that ETF lovers know there are ways to access to Indian small caps, combined the two ETFs have around $100 million in AUM and combined they don't even average 90,000 shares per day in volume. SMIN looks like its falling into line. Almost a month removed from its debut, the BATS-listed ETF has over $5 million in AUM and average daily turnover of over 7,300 shares. Those aren't bad numbers for a month-old ETF, but SMIN faces another issues and its one that many new ETFs have to contend with: Timing. As in SMIN's timing was lousy. As in the ETF came to market at the tail end of the India ETF rally. Now SMIN is down since its debut and that's not counting the 4% beating its taking today. And this could lead to another issue. When investors decide they want to buy Indian small caps on the dip and there's a fair chance that could happen SCIF and SCIN could be their first destinations, not SMIN. For now, SMIN has two distinct advantages, one of which validates its existence. The iShares name is hard to compete with. Second, SMIN's lower fees cannot be ignored and that means its rivals will have to consider slashing their expenses or risk losing assets. For traders, it's probably best to stick with the more established funds for now.