VanEck has launched two US wide moat ETFs in Europe, ETF Stream can reveal.
The VanEck Morningstar US Wide Moat UCITS ETF (MOTU) and VanEck Morningstar US SMID Moat UCITS ETF (SMOT) are listed on the London Stock Exchange and Deutsche Boerse with total expense ratios (TERs) of 0.46% and 0.49%, respectively.
MOTU physically replicates the Morningstar Wide Moat Focus index of 50 US stocks identified as having a competitive advantage versus their peer group.
Dmitrii Ponomarev, ETF product manager at VanEck, told ETF Stream the strategy is “semi-active”, with the ‘economic moat’ concept first coined by Warren Buffett being applied through quantitative valuation metrics as well as Morningstar analysis on companies’ ability to protect their market share.
This includes research into cost leadership, economies of scale, network effects, intangible assets such as brand and high switching costs for users, which combine to offer a view of the barriers to entry for potential competitors.
MOTU’s top five holdings are Salesforce, Equifax, US Bancorp, Allegion and Masco.
The ETF is a UCITS iteration of the VanEck Morningstar Wide Moat ETF (MOAT), which currently boasts $13.4bn assets under management (AUM).
Andrew Lane, director of equity research at Morningstar, said: “Since its launch in February 2007, the Morningstar Wide Moat Focus index has outperformed its benchmark, the Morningstar US Market index, by 327 basis points annually.
“In each of the three years in 2008, 2018 and 2022 in which the market declined, it held up better than the broad US equity market and also achieved outperformance in each subsequent recovery year.”
Meanwhile, SMOT physical tracks the Morningstar US Small-Mid Cap Focus index of 99 US small and mid-cap companies identified as having economic moats.
The product mirrors an existing US-listed VanEck ETF, which houses $241m, and its top five weightings are Expedia, BNY Mellon, Capital One Financial, Doordash and Ionis Pharmaceuticals.
Martijn Rozemuller (pictured), CEO of VanEck Europe, commented: “In comparison to large-cap shares, shares from the small and mid-cap sector have historically often achieved higher yields.
“Although such small and mid-cap shares make up a considerable proportion of the US equity market, they are frequently underweighted in portfolios.”
Ponomarev added the decision to launch the products in UCITS format is also an attempt to tap demand for the regulatory framework from clients outside of Europe.
“There is demand from investors in Latin America and Asia-Pacific who like the UCITS vehicle and who want exposure to wide moat strategies,” he said. “We have had direct clients in these regions reaching out and are actively waiting for these launches. We are receiving queries every day.”
The arrival of MOTU and SMOT takes VanEck’s moat suite to four UCITS ETFs after the VanEck Morningstar US Sustainable Wide Moat UCITS ETF (MOAT) and the VanEck Morningstar Global Wide Moat UCITS ETF (GOAT) launched in 2015 and 2020, respectively.