Even for someone who follows the markets daily there is an avalanche of ETF products out there, much of it "me too". Hence if an ETF does not catch attention quickly it generally languishes in purgatory. But Claymore has a new product out that fills a nice niche in between its small cap offering, and the very large cap type of ETFs, most notably the very popular iShares Xinhua China 25 (FXI) - a product we've owned on an off the past few years. This is what I term a mega cap type of fund; it owns the largest of the large names in China - many of which are available in the US as ADRs. The average market cap in this ETF is approaching $70B in size; quite large - but the top end names are some of the most highly valued companies in the world.
While China is an exception (to a degree) you generally will find more growth in mid or small cap names (but higher volatility) so I thought it would be interesting to compare and contrast the 2 Claymore products. The small cap ETF is obvious in where it is placed in the food chain - but with the new all cap ETF you can get exposure from large companies, to medium, to small and this might turn out to be a very popular ETF over time for that reason.
First, let's review Claymore AlphaShares China Small Cap ETF (HAO) as its been around for a good while. It's fund page can be found here.
The ETF has decent volume - trading about 300,000 shares a day, with an expense ratio of 0.70%. The ETF has attracted about $250M in assets, and the year to date performance as of 10/31, was 76.1%.
Next we have the new Claymore AlphaShares China All Cap ETF (YAO) which launched in the past few weeks.
The Claymore/AlphaShares China All-Cap ETF (the "Fund"), NYSE Arca:YAO, seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an equity index called the AlphaShares China All-Cap Index (the “China Index” or the “Index”).
The ETF actually had an amazing 1.3 million shares of volume the first day out - but has since fallen off. It has not yet been around a month so we can't tell yet if momentum will continue; but it also has the same expense ratio as its smaller brother. It has already attracted $72M in assets in under a month, so it seems to be quite popular.
Now let's compare the ETFs, in terms of size of companies owned, number of companies owned, along with sector exposure
|# of Securities||135||99|
|Average Mkt Cap||$1.9 B||$18.4 B|
|Top 5 Sectors|
|(sector data as of 9/30)|
We can see the All Cap offering owns companies on average 10x as large as the small cap offering; no surprise there. This is still far smaller than the average size in the iShare Xinhau China 25 ETF referenced above. Since most of China's largest companies are financial or energy based, this has also skewed YAO to a 1/3rd allocation into that 1 sector, with nearly another 1/5th into the energy sector. We can see this in YAO's top holdings
- Bank of China
- China Life Insurance (LFC)
- CNOOC (CEO)
- Industrial Bank
- China Construction Bank
- PetroChina (PTR)
- China Mobile (CHL)
Turning back to the Small Cap ETF, the top holdings are very different:
- Citic Pacific
- Netease.com (NTES)
- Dongfeng Motor
- Ctrip.com (CTRP)
- Yanzhou Coal Mining (YZC)
So much like the Brazilian or coming Indian small cap ETFs we'd expect more volatility the smaller you go, but more of a real exposure to the domestic economy - especially the consumer. Whereas the larger the ETF skews, the more exposure to multinational type of companies you would have. But either way - it is nice to begin to have more options.
3 minute video on the launch of Claymore AlphaShares China All Cap ETF (YAO) below