New Listing

WisdomTree excludes state-owned enterprises in emerging market ETF launch

Non-SOEs have outperformed SOEs by 93.9% since the end of 2007

Jamie Gordon

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WisdomTree has launched an emerging markets equity ETF that excludes state-owned enterprises (SOEs).

The WisdomTree Emerging Markets ex-State-Owned Enterprises ESG Screened UCITS ETF (XSOE) islisted on the London Stock Exchange, Deutsche Boerse and Borsa Italiana with a total expense ratio (TER) of 0.32%. 

XSOE tracks the WisdomTree Emerging Markets ex-State-Owned Enterprises ESG Screened index which targets companies across emerging markets that do not have government ownership exceeding 20% of outstanding shares.

The index also aims to exclude companies from its parent investment universe based on environmental, social and governance (ESG) criteria including involvement in controversial weapons, tobacco, thermal coal or activities in breach of the United Nations Global Compact

The launch of this ETF in Europe follows a spate of headlines detailing the negative impact Chinese state oversight has had on private shareholder interests in recent weeks.

XSOE’s arrival in Europe follows a seven-year stint across the pond, in which the equivalent ETF, the WisdomTree Emerging Markets ex-State-Owned Enterprises ETF (XSOE), has amassed $4.8bn in assets under management (AUM) since launch in 2014.

Due to its non-SOE and ESG considerations, XSOE is overweight ‘new economy’ sectors such as information technology, consumer discretionary and communication services.

The firm said emerging market non-SOEs have outperformed SOEs by 93.9% since the end of 2007.

Aneeka Gupta, director, research at WisdomTree, said: “Over time, government influence on SOEs can lead to quite large but fairly inefficient businesses. This influence can stagnate the long-term growth potential of these companies in their respective emerging market economies.

“A large portion of existing emerging market indices are made up of SOEs increasing the risk investors are taking with their emerging market exposure.”

Alexis Marinof (pictured), head of Europe at WisdomTree, added: “XSOE is the first of its kind in Europe, offering targeted exposure to emerging market companies that have less than 20% government ownership.  

“As with all of our UCITS equity ETFs tracking WisdomTree proprietary indices, we have added an ESG screen to XSOE. We believe this will increase the appeal of XSOE among European investors who are increasingly focused on ESG.”

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