Claymore has just announced a new ETF to track a broad emerging market index that will be of interest to Canadians worried about estate tax implications of holding cheaper US-based emerging market ETFs such as the Vanguard Emerging Markets ETF (VWO). Unlike the soon to be announced BMO Emerging Markets ETF, CWO is truly a broad emerging market index fund. A comparison with VWO reveals an almost identical country diversification and only minor differences in the top 10 holdings. Curiously, the fact card of CWO is vague on the index that is tracked:
The Manager will select an Emerging Markets Benchmark Index such as the MSCI Emerging Markets Index, the FTSE RAFI Emerging Index or another widely recognized emerging markets index in order to provide such exposure and may change the Emerging Markets Benchmark Index in its discretion without unitholder approval.
The MER of the fund is a bit steep at 65 basis points compared to just 27 basis points (incidentally, the MER for VWO is down 3 basis points since I first wrote a post on it!) for VWO. But then again, it is hard to compete with Vanguard on fees. CWO also hedges the currency exposure of the fund, which is of dubious benefit given the high costs involved in the form of tracking errors.
Claymore should be applauded for being the first to introduce a broad market emerging market ETF in Canada. As some of Claymore’s newest funds are thinly traded and have very wide bid-ask spreads, I would hold off on considering the ETF for investment until the fund is fairly widely held.
See also: Jon Chevreau wrote about CWO in his blog.
