With so many ETFs consisting of similar holdings and exposure, many times judging one against another becomes a case of each one's idea of building a better mousetrap.Recently, my colleague Jen Ryan
Another big difference is the average market cap. CWI has a much smaller bias, with an average cap of $6.82 billion (per the prospectus) vs. $37 billion for EFA. Given how the top-10 holdings are so similar, I am not sure whether this conceit can actually stand up, but such a big divergence in cap size could matter. CWI has a 0.35% expense ratio and should yield 2.5%. The expense is the same as EFA (which I doubt is a coincidence), and the yield compares favorably with that of EFA, which yields 2.1%. In the literature, StateStreet tells us that for one year ended Sept. 30, 2006, CWI's index returned 19.36%, which compares favorably, but not dramatically so, with EFA's return for the same time, which was 18.77%. I am surprised the extra emerging-market exposure was not more of a differentiator in performance. On the whole, I doubt the fund will be much different from EFA, but it could be. It might be a better way for people who want all of their foreign exposure in one fund to get it, but maybe by only a slim margin. I would expect that over longer periods of time, the larger emerging-market exposure would add a little more return and volatility to the mix, but to be clear, the fund will never trade like the Turkish Investment Fund ( TKF) or any other hot potato.
The theme to this discussion is finding a better way to get foreign exposure on a broad scale. This would not be complete without a mention of the WisdomTree DIEFA High-Yielding Equity Index Fund ( DTH). WisdomTree drew a lot of attention for claims that dividend weighting was better than cap weighting, and while it has only been out since June, DTH is up 25% while EFA is up 18%. If you own EFA and plan to study CWI, you also need to study DTH. I think it behooves investors to be ETF-provider agnostic. Save for trusting that the provider is a viable going concern, who the provider is should not matter to you. You should own whatever you think is the best choice to capture, in this case broad foreign, and while DTH does not have as much emerging-market exposure as CWI, I think there is a good chance it will turn out to be better than CWI.