IQ Global Oil Small Cap ETF (IOIL)

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Launched last Thursday (5/5/11)

http://etfdailynews.com/2011/05/10/new-iq-global-oil-small-cap-etf-is-a-viable-alternative/

May 10th, 2011

Ron Rowland ( http://www.investwithanedge.com/ ): Index IQ launched IQ Global Oil Small Cap ETF (NYSE:IOIL) last Thursday (5/5/11), the first ETF to target small cap stocks in the global oil industry. The underlying index ( http://www.indexiq.com/indexes/natural-resources-a-commodities-indexes/iq-global-oil-small-cap-index.html ) defines small caps as stocks in the bottom 10% of the entire oil industry’s market capitalization. The sub-sector breakdown shows Refining & Marketing at 40.5%, Exploration & Production 36.9%, and Equipment, Services & Drilling 22.6%.

The fund’s 61 holdings are weighted by float-adjusted market capitalization. While no stock is supposed to exceed a 10% allocation at the quarterly rebalancing, presently no holdings need to be capped. The largest position is Sunoco Inc (NYSE:SUN) at 6.2%, followed by Oceaneering International Inc (NYSE:OII) 5.3%, Core Laboratories (NYSE:CLB) 5.2%, Tesoro Corp (NYSE:TSO) 4.5%, Petrominerales Ltd (PMGLF) 4.3%, and Alliance Oil Company Ltd (ALLZF) 3.9%.

The IOIL portfolio currently spans 14 countries, including both developed and emerging markets. I was somewhat surprised to see Thailand with the third largest allocation but Russia and Mexico not represented at all. My guess is that this reflects the large size of oil-related companies in those places. The rest of the list was no surprise with the U.S. at 45.1%, Canada 11.7%, Thailand 7.5%, Colombia 4.3%, Japan 4.0%, Sweden 3.9%, U.K. 3.9%, Finland 3.0%, and six others combining for 13.5%.

The only other small-cap energy ETF is PowerShares S&P Small Cap Energy (NYSE:PSCE), but its geographic mandate is narrower. PSCE holds only stocks that are part of the domestically-oriented S&P SmallCap 600 Index.

All in all, IOIL is well-differentiated from the dozens of other energy ETFs and provides a viable new alternative. The fund’s initial expense ratio is 0.75%. Additional information can be found in the press release http://www.indexiq.com/docs/media/First_Global_Oil_Small_Cap_ETF_(IOIL)_Launched_by_IndexIQ.pdf (pdf), overview page http://www.indexiq.com/etfs/natural-resources-a-commodities/iq-global-oil-small-cap-etf.html , fact sheet http://www.indexiq.com/docs/ioil/factsheet.pdf (pdf), and prospectus http://www.indexiq.com/docs/ioil/indexiq_etfsummary_prospectusioil.pdf (pdf). Copyright 2009-2011 ETFDAILYNEWS.COM