Morningstar 2011/2012 - (Page 39)

+ 1 866 374 – 8800 global.morningstar.com 39 Morningstar Traded Fund Research Analyst coverage of exchange-traded and closed-end funds. ® 3 Analyst coverage of more than 800 ETFs worldwide 3 Qualitative ratings and reports on closed-end funds As the market for exchange-traded funds around the world continues to grow, we’re expanding the research that’s made us a global leader in independent traded fund analysis. Our analysts cover more than 600 ETFs in the United States and Canada—representing 96% of the total assets under management—plus more than 200 ETFs in Europe, Asia, and Australia. Leveraging our strengths in data, research, and technology, we help institutions design investment lineups, develop customizable online tools (see p. 23), and educate investors. New data for estimated holding cost, tracking volatility, market impact cost, and portfolio concentration helps reveal a fund’s true costs and risks. Investors and advisors can access our ETF analyst reports, videos, and industry commentary directly ® through Morningstar.com, subscribe to ® the Morningstar ETFInvestor newsletter (see p. 71). Advisors can attend our annual Morningstar ETF Invest Conference. SM We are also extending our U.S. and U.K. closed-end fund coverage with the new Morningstar Analyst Rating for closed-end funds coming to Morningstar.com and Morningstar ® Traded Fund Center (see p. 16). Much like the Morningstar Analyst Rating for mutual funds, this analysis is based on proprietary methodology that considers various performance measures as well as our perspective on a fund’s future performance. SM View sample research global.morningstar.com/ETFResearch global.morningstar.com/TradedFundCenter International Equity | August 2011 | For Financial Professional Use Only ETF Talking Points Insights from Morningstar's ETF Analysts You Want Emerging-Markets Exposure? Look Beyond the Usual Suspects A case for the alternatives to the popular EEM and VWO funds. The Issues Key takeaways: A market-cap-weighted emerging-markets fund has a heavy exposure to partially owned government entities, which at times can put national interests ahead of profitability. The value premium has also been observed in international equities. A dividendweighted portfolio is an attractive way to construct a value-tilted emerging-markets portfolio, as it is not affected by variances in accounting standards across countries. We recommend WisdomTree Emerging Markets Equity Income DEM and WisdomTree Emerging Markets Small Cap Dividend DGS . Multinational firms domiciled in developed countries are an attractive way to gain exposure to emerging markets, particularly at this time given their lower valuations relative to emerging-markets companies. IShares MSCI Singapore Index EWS is composed of companies with good corporate governance and heavy exposure to Greater China and Southeast Asia. The funds mentioned in this note all have dividend yields of over 3%. ETFs have surged in popularity for emerging-markets exposure, with iShares MSCI Emerging Markets Index EEM and Vanguard MSCI Emerging Markets VWO together accounting for almost 30% of all the assets invested in diversified emergingmarkets mutual funds and ETFs. These funds track a market-cap-weighted index, which in theory provides broad exposure to the emerging-markets asset class, just as SPDR S&P 500 SPY provides broad exposure to U.S. equities. However, many emerging-markets large-cap stocks are partially government-owned, such as Petrobras PBR and China Mobile CHL. At times, these entities may put political goals ahead of the interests of minority shareholders, which can weigh on share prices. The funds below have relatively lower exposure to these government-owned companies and have delivered better risk-adjusted returns. ETF Recommendations WisdomTree Emerging Markets Equity Income DEM is our top pick. This dividend-weighted fund's 10.5% three-year annualized return is 600 to 700 basis points higher than that of VWO and EEM, thanks in part to DEM's dividend yield of 3.5%, which is double that of the other two funds. We like this ETF's dividend-weighting methodology because it is a straightforward measure of value that is not affected by variances in accounting standards across countries, and has resulted in a less volatile portfolio. This dividend-focused portfolio also provides a value tilt, which should benefit investors as the value premium has also been observed in emerging markets. Investors should note that this ETF has heavy weightings in Brazil (about 20% of the portfolio) and Taiwan (20%), and has a low weighting in China (3%). This ETF's expense ratio is 0.63%. We also like WisdomTree Emerging Markets Small Cap Dividend DGS, which, like DEM, weighs holdings by annual cash dividends paid. This fund's three-year annualized return of 14.3% was mostly driven by the relative outperformance of small-caps in emerging markets. Notably, although this is a small-cap ETF, its three-year volatility is actually lower than that of EEM and VWO, which suggests that dividends have been a predictive measure of quality in emerging markets. International small caps usually provide better exposure to local growth trends and local currencies, as compared with large caps, which can be multinational firms, or companies that operate in sectors that are driven by global trends, such as technology and energy. Not surprisingly, DGS has a lower correlation to the S&P 500, relative to DEM. This ETF has a dividend yield of 3% and has an expense ratio of 0.63%. IShares MSCI Singapore Index EWS provides exposure to growth opportunities in Asian marketsthrough companies domiciled in Singapore, a country with developed financial markets and good corporate governance. Most of EWS' holdings, which are primarily financial and industrial companies, have operations in Southeast Asia and Greater China. Over the past five years, this ETF's Sharpe ratio of 0.54 has been higher than MSCI Emerging Markets Index’s 0.47. In addition, the correlation between EWS and the S&P 500 has been lower than that of the MSCI Emerging Markets Index and the S&P 500. This fund has a dividend yield of 3.6% and an expense ratio of 0.53%. ETF Charts and Tools ©2011 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein: [1] include the proprietary information of Morningstar and its content providers; [2] may not be copied or redistributed; [3] do not constitute investment advice offered by Morningstar; [4] are provided solely for informational purposes and, thus, do not constitute an offer to buy or sell any security; and [5] are not warranted to be correct, complete or timely. Any ETF designated in ETF Talking Points was selected by Morningstar using various qualitative criteria, including Morningstar’s current expectations of market performance/direction. Neither Morningstar nor its content providers is responsible for any trading decisions, damages or other losses arising from, or related to, this information, data, analysis or opinions or their use by any person. ß ® ETF Analysis Closed-End Fund Reports ETF Invest Conference Video Commentary Trusted thought leadership. Our independent analysts share their insights through detailed ETF and closed-end fund reports and at the ETF Invest Conference. Ideas to action. Dynamic tools and timely videos help investors make practical investment decisions. http://global.morningstar.com http://www.Morningstar.com http://www.Morningstar.com http://global.morningstar.com/ETFResearch http://global.morningstar.com/TradedFundCenter

Table of Contents for the Digital Edition of Morningstar 2011/2012

Morningstar 2011/2012
Table of Contents
Commonwealth Financial Network
The Hartford
ING
Transamerica
Institutional Software
Custom Software and Services
Investment Data, Market Data, and Indexes
Fund, Stock, and Credit Research
Advisory, Retirement, and Portfolio Management Services
Independent Advisor Software and Services
Financial Communications
Investor Websites and Publications

Morningstar 2011/2012

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