iShares Rolls Out A Suite of Foreign Sector ETFs

iShares very quietly rolled rolled out nine foreign sector ETFs on Friday although IndexUniverse did notice the rollout. iShares was early to market with sector funds that combine both foreign and domestic stock in one fund but these are foreign only. The reason that Friday's rollout only had nine funds is that the tenth one, the iShares MSCI ACWI ex US Financials Sector Index Fund (AXFN), was actually the first one and came out in January.

The new nine funds;

* iShares MSCI ACWI ex US Consumer Discretionary Sector Index Fund (AXDI)
* iShares MSCI ACWI ex US Consumer Staples Sector Index Fund (AXSL)
* iShares MSCI ACWI ex US Energy Sector Index Fund (AXEN)
* iShares MSCI ACWI ex US Health Care Sector Index Fund (AXHE)
* iShares MSCI ACWI ex US Industrials Sector Index Fund (AXID)
* iShares MSCI ACWI ex US Information Technology Sector Index Fund (AXIT)
* iShares MSCI ACWI ex US Materials Sector Index Fund (AXMT)
* iShares MSCI ACWI ex US Telecommunication Services Sector Index Fund (AXTE)
* iShares MSCI ACWI ex US Utilities Sector Index Fund AXUT

In looking under the hood of all nine funds they are all quite heavy in big Western Europe and Japan. This is not a surprise given that the funds are cap weighted and it is those countries where the largest stocks are. SPDR has a similar line of ETFs that have not seemed to gain a lot of traction. It would be very unlikely that the new iShares funds will trade much differently than those SPDR funds and maybe not much differently than the global sector funds (foreign plus domestic) that iShares already had.

One of the first thoughts I had was that WisdomTree got out of the foreign sector fund business too soon. It came out with a full suite of foreign sector funds weighted by dividends. It then closed most of them leaving only energy (client holding), utilities and materials. Also listed in with the sector funds is a REIT fund. Generally speaking Japanese companies are not big dividend payers so most of the funds had relatively little exposure which IMO made them a better choice for many sectors. Unfortunately this little point was not enough to attract enough assets to make the funds viable for WisdomTree.

iShares also has a couple of emerging market sector ETFs including the iShares MSCI Emerging Markets Materials Sector Index Fund (EMMT). The materials sector is an easy place to add foreign exposure because many of the companies are quite large in their respective home markets and might have an NYSE listing or at least a pinksheet ADR which makes them easy to follow. For anyone who would rather use an ETF for materials exposure, iShares now provides three different funds with foreign exposure.

The oldest of the three is the iShares S&P Global Materials Index Fund (MXI) which I use for some client accounts. It combines US and foreign with names like BHP Billiton, Rio Tinto and Monsanto but there is very little emerging market exposure. The new AXMT is obviously all foreign, also heavy in BHP Billiton and Rio Tinto but has a larger, 20%, allocation to emerging markets. EMMT is obviously all emerging markets, it has 20% in Vale (VALE)--a lot of iShares funds double up on stocks like VALE, BHP and RTP because of multiple listings and preferred shares)--which is also well represented in the other two funds. EMMT has a few other very large companies that will be familiar to many investors. VALE is a long time client holding.

For some standard boilerplate, anyone interested in buying MXI would be well advised to learn a little about BHP as two of its listings (Australia and UK) add up to about 12% of the fund.

The choice available, and I would extend this to include funds like the GlobalX Copper Miners ETF (COPX), the Jefferies CRB Global Agriculture Equity Fund (CRBA) and the First Trust ISE Global Platinum Index Fund (PLTM), means that investors willing and able to spend the time can capture some very specific things in terms of segments within the sector and also manage the volatility of the portfolio. EMMT should be more volatile than MXI most of the time.

In the raging bull market of the 1990s these concepts were less important because everything went up a lot. Ten years past those good times and there are still a lot of people who do not yet understand the need for a more tactical approach. I believe this has been important for the last ten years and more importantly will continue to be important.

Our new shed is just about complete. Above is the inside still looking a little sparse. I have a place to sit, a phone, a couple of lights, a picture of Fenway Park and CNBC.

The second picture is obviously the outside. There are three windows plus the glass door so plenty of light can get in. The little white thing next to the front door is a dog door. We need to do something for steps and we'll call the gutter guy today. Not too shabby.