Market Vectors to launch MSCI World ex Australia Quality ETF

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New ETF will provide Australian investors with cost-effective and transparent exposure to high-quality international shares in a single trade on the ASX

Arian Niron

Arian Neiron

Market Vectors ETFs, the exchange traded fund (ETF) business of US-based investment manager Van Eck Global, yesterday announced that it is planning to launch a new international equities ETF on the ASX. The ETF will seek to track the MSCI World ex Australia Quality Index which selects international companies on the basis of three key quality factors: high return on equity (ROE), stable year-on-year earnings growth and low financial leverage.

Arian Neiron, Managing Director of Market Vectors ETFs and Van Eck Global in Australia, said,“We are delighted to be shortly expanding our ETF range in Australia with the launch of our first international ETF and to be working in partnership with MSCI, one of the world’s leading index providers. The new ETF is in response to increasing demand from Australian investors for greater choice, flexibility and cost-effectiveness when investing internationally.

“Once launched, the Market Vectors MSCI World ex Australia Quality ETF will provide Australian investors with first-of-its-kind access via an ETF to a portfolio of 300 quality international shares that have demonstrated outperformance and lower volatility compared to the conventional global benchmark indices.

“MSCI’s research suggests that quality growth companies that have high ROE, stable earnings and low financial leverage are uncorrelated with the broad business cycle and can provide diversification benefits in portfolio allocation.

“Australian investment portfolios have one of the largest domestic equity biases in the world, dominated by banks and resource shares. Australia lacks exposure to sectors such as technology and healthcare, which form much larger parts of the investment universe in other developed markets.  Our new Market Vectors MSCI World ex Australia Quality ETF will provide Australian investors with a portfolio of some of the most exciting international companies such as Google and Apple via the ASX. Investors who are only exposed to Australian shares are missing out on the growth potential and diversification benefits of these shares,” Mr Neiron said.

Theodore Niggli, Managing Director and Head of MSCI’s Asia Pacific Index Business, said, “We are delighted that Market Vectors has chosen our MSCI World ex Australia Quality Index as the basis of this new ETF. Factor investing is an important and global trend, and we are thrilled to see this innovation be made available to Australian investors.” There is currently US$95 billion of assets benchmarked to MSCI Factor Indexes globally.

MSCI World ex Australia Quality Index

Empirical research shows that quality growth stocks have historically outperformed the market with relatively low volatility over long time periods. The MSCI World ex Australia Quality Index has delivered a one-year return of 24.57% and average annual returns of 10% since its inception on 30 November 19941.

Current sector weightings in the MSCI World ex Australia Quality Index include Information Technology (26.7%), Consumer Discretionary (16.4%), Healthcare (17%), Consumer Staples (14.9%), Industrials (11.5%), Energy (6.2%) and Materials (3.7%)1.

The top ten stocks in the MSCI World ex Australia Quality Index are Apple, Microsoft Corp, Exxon Mobil Corp, Johnson & Johnson, Roche Holding, Gilead Sciences, IBM, Home Depot, Coca-Cola and Google1.

The Market Vectors MSCI World ex Australia Quality ETF is not currently available for investment. An application is currently with the ASX and further information about the new ETF will be available once the necessary approvals have been received.

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[1] MSCI World ex Australia Quality index Update – August 29, 2014

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