Lonsec reviews Market Vectors Australian Equal Weight ETF

From
Matthew McKinnon

Matthew McKinnon

Market Vectors ETFs (Market Vectors), the exchange traded fund (ETF) business of US-based investment manager Van Eck Global, today announced it has received an ‘Investment GradeIndex’ rating from research house, Lonsec, for its recently listed Market Vectors Australian Equal Weight ETF (ASX code: MVW).

Market Vectors Australian Equal Weight ETF is designed to track a purpose-built index, the Market Vectors Australia Equal Weight Index, which currently provides investors with equal exposure across 76 of the most liquid large and mid-cap ASX-listed securities.

Matthew McKinnon, Director, Institutions and Intermediaries at Market Vectors Australia, commented, “We are pleased to receive a positive review from Lonsec for Market Vectors Australian Equal Weight ETF – the first equal weight ETF available to Australian investors. Equal weight investing is well established in Europe and the United States, where it is used to build a diversified core portfolio.  The methodology is well suited to the Australian market, which is heavily concentrated with the top 10 stocks making up more than 50% of the top 200 listed companies by market capitalisation. Our research shows that MVW’s underlying equal weight index has outperformed the S&P/ASX 200 Index by 23% over the last 10 years.

“What sets our ETFs apart is the rigorously designed methodology and rules governing the construction of the underlying indices. Each of our ETFs is based on a Market Vectors’ purpose-built index which focuses on liquidity and diversification to design investable indices. Our ETFs therefore comprise portfolios of assets that are liquid and diversified, cost effective and easily accessible to investors via a single trade on the ASX.

“The index methodology for MVW reduces exposure to the large-capitalisation companies that typically dominate Australian benchmark indices and increases exposure to the most liquid Australian mid-caps, providing an alternative to ETFs based purely on market capitalisation indices.

“We are confident that MVW will attract a range of investors from direct and SMSF investors to intermediary and institutions seeking diversified balanced exposure to the Australian equity market,” Mr McKinnon said.

Market Vectors listed its Market Vectors Australian Equal Weight ETF on the ASX this month. The equal weight index has been especially developed by Market Vectors Index Solutions (MVIS), the independent index company of Van Eck Global based in Germany.

Lonsec review – Market Vectors Australian Equal Weight ETF (MVW) 

Lonsec has conviction that Market Vectors Australian Equal Weight ETF can achieve its objective. “The Market Vectors Australian Equal Weight ETF tracks an index that is new to the Australian market and is designed to provide a more diversified exposure than traditional market cap-weighted indices which, given the nature of the Australian economy, have a highly concentrated weighting to banks and miners,” Lonsec said.

“The Fund offers a simple and easy means of gaining a diversified exposure to the Australian share market via a single transaction. The Fund tracks the Market Vectors Australia Equal Weight Index, which provides greater diversification across industries versus traditional market cap-weighted indices,” the ratings report said.

Lonsec favourably noted the transparency of the index. “Lonsec considers the index rules to be very transparent and commends the Van Eck group of companies on making the full index methodology and index constituent selection and review processes readily available to investors.”

“It is Lonsec’s belief that not all index providers are as forthcoming with this information. Furthermore, Lonsec believes that access to transparent, straight forward information on index products, their underlying indices and how they are constructed is crucial to investors’ understanding and ability to gauge suitability,” the report said.

“By equal weighting the index constituents, the underlying index has a significantly higher weighting to mid-cap stocks, and is more diversified by sector and individual security weightings than the S&P/ASX 200 Index,” Lonsec said

Analysis by MVIS reveals that its equal-weight index has outperformed the S&P/ASX 200 in nine out of the last 12 years. Overall, the Market Vectors Australia Equal Weight Index has outperformed the S&P/ASX 200 since 2002 to March 2014 by 23 per cent, according to MVIS

The Market Vectors Australian Equal Weight ETF joins four existing Market Vectors sector-based ETFs which were listed on the ASX in October last year. They are the Market Vectors Australian Banks ETF (MVB), Market Vectors Australian Property ETF (MVA), Market Vectors Australian Resources ETF (MVR) and Market Vectors Australian Emerging Resources ETF (MVE).

Market Vectors Australia is planning to launch more ETFs on the ASX later this year as it continues to gain market share in the Australian ETF market.

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