New York-based asset manager Van Eck Global has launched Market Vectors Germany Small-Cap ETF (NYSE Arca: GERJ), the first exchange-traded fund (ETF) designed to give investors pure-play exposure to Europe’s largest economy.
The German economy is the fourth largest in the world as measured by gross domestic product (GDP). The country has bounced back quickly from the worldwide recession, expanding at an annual rate of 3.6 percent in 2010, with unemployment declining to its lowest rate since 1992. A substantial portion of the country’s economy is made up of small companies that have a history of dominating highly specialized industry sectors such as machine tools, auto parts, printing presses, and electrical equipment. Many of these companies are significant exporters, allowing Germany to maintain its share of world trade over the past decade. The rapidly growing countries of Asia comprise Germany’s second-largest export market.
“The German economy has rebounded quite strongly from the global economic downturn and appears well positioned to continue to expand,” said Jan van Eck, principal at Van Eck Global. “With its history of innovation and niche market strengths, the country’s small-cap sector may continue to benefit from strong export-driven demand as well as domestic consumption. Our new ETF gives investors a focused vehicle for gaining exposure to this vibrant segment of the German economy.”
Fund to Track Market Vectors IndexGERJ seeks to replicate, before fees and expenses, the performance of the Market Vectors Germany Small-Cap Index (MVGERJTR). Market Vectors indexes are designed to more fully reflect the fundamental dynamics of investing in local market economies. Constituent requirements include liquidity based on minimum levels of market capitalization and daily trading volume; local market exposure, with at least 50 percent of revenues generated from a country, even if the company is listed, domiciled, or headquartered elsewhere; diversification 1 based on a tiered weighting scheme; and transparency, with constituents and weights updated and published daily. As of March 8, 2011, the Market Vectors Germany Small-Cap Index was comprised of 95 companies with an average market capitalization of $US1.2 billion. The largest sector weightings were Industrials (approximately 35 percent), IT (16 percent), and Consumer Discretionary (15 percent). [Transparent daily index information is available on the company’s website.] GERJ carries a net expense ratio of 0.55 percent and a gross expense ratio of 0.63 percent and joins Van Eck’s family of international ETFs, which also includes funds focused on Africa ( AFK), Brazil small-caps ( BRF), China ( PEK), Colombia ( COLX), Egypt ( EGPT), the Gulf States ( MES), India small-caps ( SCIF), Indonesia ( IDX), Latin America small-caps ( LATM), Poland ( PLND), Russian large-caps ( RSX) and Vietnam ( VNM). Van Eck’s Market Vectors family of ETFs, which also include funds focused on commodities, municipal bonds, and emerging market local currency bonds, had approximately $31.3 billion in assets under management (AUM) as of December 31, 2010, making it the sixth-largest provider of ETFs in the United States and ninth-largest in the world.