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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: shades who wrote (50661)	5/6/2006 9:24:29 AM
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Barclays Launches 10 New Subsector ETFs . (Updates to add comments from analysts.) By Ian Salisbury Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Barclays Global Investors on Friday launched 10 new iShares-brand ETFs which track industry subsectors, an indication of how investors are using exchange traded funds to slice the stock market ever thinner. The new Barclays PLC (BCS) funds will allow investors to focus on narrow corners of the market - adding an index for oil and gas exploration and production and another for oil equipment and services, where previously Barclays' two energy ETF offerings tracked the wider U.S. and global energy sectors. Of the other new iShares subsector funds, three split the health care industry into pharmaceuticals, health care and medical devices; three cover financial services, following broker-dealers, insurance and regional banks; and the last two are designed to give exposure to aerospace and home construction. Barclays spokeswoman Christine Hudacko says the funds are aimed at financial advisors looking for "diversified precision instruments" for their clients accounts. "Those who are familiar with ETFs understand the easy access these products provide," she adds. ETFs are funds that resemble index-tracking mutual funds but trade on an exchange like stocks. In the relatively new ETF market, Barclays is the runaway leader for the number of funds on offer, with a total of 111. Still, there is plenty of competition for new products. The latest Barclays iShares funds could vie directly with several funds launched by upstart rival PowerShares Capital Management LLC, which recently agreed to be acquired by Amvescap PLC (AVZ). PowerShares made a name for itself by introducing a slew of narrowly focused funds, including its own energy exploration and production fund and a drug company fund. Those two PowerShares funds, which attempt to incorporate some element of active management, have an expense ratio of 0.6%, according the company. The new Barclays offerings all have an expense ratio of 0.48%. Barclays cut expenses on its sector funds from 0.6% on Monday, and the 10 new funds were launched with prices designed to match their broader counterparts. While Barclays' prices have come down, some think costs could still be too high. "The average expense ratio for ETFs used to be around 40 basis points," says Morningstar analyst Dan Culloton. "We are seeing expense ratios creep up." The sector and subsector ETFs remain much cheaper than similar open-end mutual funds, but they are more expensive than the traditional broad-based ETFs, Culloton notes. For instance, Vanguard has a total stock market ETF that charges only 7 basis points. Culloton worries that many of the new sub-sector funds simply chase investor demand for hot markets like home building and energy exploration. He compares some of the recent, narrow offerings to tech-based mutual funds which appeared in the late 1990s and early this decade. "In the long term many of those vehicles did a poor job of serving investors," he says. "They did not perform well and many have disappeared." Still, the new ETF products should give investors the chance to take certain positions that might have been difficult before. Michael Krause, president of AltaVista Independent Research Inc., a company which does fundamentals-based research on ETFs, says he primarily follows broader indexes like State Street Global Advisors' SPDR products, but would consider Barclays new subsector vehicles as useful tool to modify investment bets. "In health care, if I think pharmaceuticals are kind of weak, but I like medical devices, they are all thrown together in the SPDR [healthcare] ETF," he says. The new iShares product could allow him to buy only medical devices or carve drug companies out of the investment basket. The latter could be achieved by buying the broader health care index while shorting the narrow pharmaceuticals index, he notes. The short position would cancel out the broader index's long position in pharmaceuticals but leave intact the bullish bet on the rest of the sector, he says. The 10 Barclays iShares subsector funds began trading on the New York Stock Exchange Friday. The funds track Dow Jones & Co. (DJ) indexes designed specifically for and licensed to Barclays. Dow Jones, which also publishes this newswire, didn't have a role in issuing the ETFs themselves. -By Ian Salisbury, Dow Jones Newswires; 201-938-5219; ian.salisbury@dowjones.com (END) Dow Jones Newswires May 05, 2006 16:16 ET (20:16 GMT) Copyright (c) 2006 Dow Jones & Company, Inc.- - 04 16 PM EDT 05-05-06