WisdomTree has teamed up with Credit Suisse to launch its first Ucits ETF. The S&P China 500 Ucits ETF will seek to tap into the world’s second-largest economy by tracking the price and yield performance, before fees and expenses, of the S&P China 500 index. It is a physical fund that owns the underlying securities, including onshore listed A-shares.
The S&P China index captures the broad characteristics of the total Chinese equity market by selecting the largest and most liquid securities. The fund will be administered and domiciled in Luxembourg by State Street and will apply a total expense ratio of 0.75 per cent pa.
In terms of sector exposure, the fund currently has large weightings towards financials (28.3 per cent), information technology (16.9 per cent) and industrials (13.7 per cent). Shanghai markets represent the highest exchange listing (38.7 per cent). The fund is available through both an Isa and a Sipp wrapper.
www.wisdomtree.com
Comment
Anyone involved in the financial sector maintains a close watch on developments in China. Although WisdomTree states it is the world’s second-largest economy, it is probably best described as the world’s largest emerging market.
A lack of stability still exists in the region and although sparks of a turnaround have been present this year, it is difficult to see how China will match the soaring growth witnessed in the previous decade. Clearly, many investors still believe – on a long-term view – that huge potential exists, but this has failed to materialise for many years. The fund is obviously risky given these issues, but certainly not in “all or nothing” territory. The ongoing charge is low, but it remains competitive for an ETF – passive funds should always find it easier to drive down expenses so cost will never be an issue with these vehicles.
This will suit investors who believe that Chinese equities still harbour good potential to push past recent troubles, without relying on a fund manager to pick the right stocks. A fairly long time horizon should be considered in any event, as high volatility is almost a given and huge question marks remain as to whether China has the potential to return to its former glory.
craig.rickman@ft.com
