India's Hot Economy Attracts Buffett, Soros

NEW YORK (TheStreet) -- WisdomTree India Earnings Fund (EPI) has been a leading emerging market ETF this year and some big name investors are starting to move assets into the country.

Representing the "I" in the popular BRIC acronym, India has been one of the most popular destinations for investors looking for access to hot emerging markets. Year to date, it is beating the ETFs covering other BRIC nations, as well as iShares Emerging Market ( EEM).

Now, popular names in finance are showing growing interest in the nation's markets.

This week, a number of news sources reported that hedge fund legend George Soros is considering purchasing a stake in Asia's oldest stock exchange, the Bombay Stock Exchange. According to the report, the 4% chunk of the exchange Soros Fund Management is interested in acquiring is currently held by Dubai Holding and is estimated to be worth $40 billion.

Soros is not the first, nor the only famous, Wall Street name to warm up to India's markets. Prior to the news regarding George Soros' plans, the Oracle of Omaha, Warren Buffett, had also shown interest in the Asian nation's promising economy.

In late June, the investor hinted at his first foray into India, announcing plans to open a Berkshire Hathaway ( BRK.A) subsidiary designed to sell auto insurance. In looking at the initial report, the business proposed appears similar to Berkshire's GEICO division.

Retail investors looking to follow their favorite financiers into the increasingly popular Indian market can do so through a number of India-focused ETFs. Barring leveraged products such as Direxion Daily India Bull 2X Shares ( INDL) and debt products such as iPath MSCI India Index ETN ( INP), the two most popular options for India bulls include the WisdomTree India Earnings Fund ( EPI) and the PowerShares India Portfolio ( PIN).

The elder of these two funds, EPI, tracks the WisdomTree India Earnings Index. This index is comprised of 127 India-based companies weighted according to their respective fiscal earnings.

As a result of this indexing strategy, top holdings Reliance Industries, Infosys Technology ( INFY) and Oil & Natural Gas Corp, represent more than a quarter of the fund's total portfolio. The seven other firms listed among EPI's top 10 positions together account for an additional 18% of the fund's assets.

From a sector perspective, EPI is heavily related on India's financial and energy industry, which represent 23% and 19% slices of the fund respectively.

PowerShares' PIN follows the performance of the Indus India Index. Although it is designed to be a catch-all for India's equity markets, this index is more concentrated than EPI, with only 50 firms listed.

Once again, Reliance Industries, INFY, and Oil & Natural Gas Corp represent the largest individual slices and together make up close to 30% of the fund's index. One noticeable difference, however, is the fund's sector breakdown, which shows the Indian energy industry making up the largest slice of the fund, representing nearly 26% of its index.

PIN is a slightly cheaper alternative to EPI, charging investors 0.78% versus 0.88%.

Although they share a number of similarities, my choice for playing the nation is EPI. Throughout the past month and 2010 as a whole, the WisdomTree fund has managed to outperform its PowerShares competitor. The same can be said comparing their performance over one- and two-year periods. This trend looks to continue as more investors catch onto the potential within this nation's economy.

-- Written by Don Dion in Williamstown, Mass.

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At the time of publication, Dion Money Management does own any of the equities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.

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