A reader asked about using the WisdomTree DIEFA High Yielding Equity Fund (DTH) as a proxy for Australia.
Australia is a commodity-based economy. Because of that there is the expectation that it would have a different economic cycle than in the US. It stands to reason that the stock market cycle would then be different as well. That is why I own the country.
I did not find the country weights on the WisdomTree site but ETFconnect has it at 11.75% for Oz. The largest country weight is the UK which is 33%. The UK is heavier in materials than you might think, iShares UK (EWU) has an 8% weight but the top holdings in DTH don't have a lot of commodity-based exposure. There is a fair bit of energy names in DTH but I think I would differentiate between energy and materials where Australia (or a proxy for) is concerned.
The largest commodity or commodity-based stock is Commonwealth Bank of Australia at 1.23% but that is just the 17th largest holding.
I don't think DTH will end up being a proxy for Australia but there is not enough track record yet to know. This has nothing to do with the merits of the fund. For low beta, big cap, high yielding foreign exposure it looks good at first glance.
There is an Australian ETF, plenty of ADRs and a CEF or two as well. Most clients own Australia New Zealand Bank (ANZ) or iShares Australia (EWA) which is a personal holding.
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5 comments:
You very well have already covered Wisdom Tree ets. Can you offer a view on this group's potential role in a portfolio? I was not able to find a table at Wisdom Tree that offers yield rate? Price performance on a chart may not be a fair means of comparison because yield is not incorporated. If the cap or country etfs are used as a comparison indicator, would that be a bullish signal for a using its companion dividend etf from wisdom tree? If that makes sense, selection would evolve from relative strength. Enough my own rambling. Big names are attached to wisdom tree, but I'm not sure how to wrap my head around it.
And if it's the resource aspect of the Australian economy you're interested in, why not just by BHP Billiton? They're pretty much in every commodity that counts. I think Aussie financial companies are definitely underappreciated for their exposure to the emergine markets of Asia, with both Australia New Zealand Bank and Macquarie looking pretty interesting.
I haven't wrapped my head around wisdomtree either. For the current crop of their funds it seems like they are potentially substitutes in a portfolio that uses broad based ETFs.
Obviously there are other roles but as the funds so far are cap weighted dividend indices. They have sector funds in registration but they are not out yet.
To One guy, the comment I was responding too was asking about an ETF with a huge dividend as a proxy for Australia. I took that to mean the reader was looking for yield.
According to Yahoo Finance BHP yields 0.8%. The reader quoted a yield on the WisdomTree fund in the sixes, EWA yields 3.18%. Also I'm not sure the reader has any interest in individual stocks.
The WisdomTree Pacific ex-Japan High-Yielding Equity fund is 87% Australian.
Hi Roger
Thanks for your interesting comments on the broad-based DTH, but my suggested proxy for Oz was the DNH, which is 87% in actual Australian stocks.
Tzvika
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