WisdomTree, an exchange traded fund (ETF) and exchange traded product (ETP) provider, has launched a new smart beta equity ETF, called WisdomTree Japan SmallCap Dividend UCITS ETF, on the London Stock Exchange.
The fund seeks to track the price and yield performance of theETF and has a net expense ratio of 0.48 percent. According to the firm, there is growing domestic demand for Japanese small-caps, with the index’s constituents derive more than 80 percent of their weighted average revenue inside Japan, compared with 57 percent for Japanese large-caps.
The index’s methodology incorporates the following: index universe, as constituents must be listed on the Tokyo stock exchange and pay at least $5 million in gross cash dividend on shares; constituent selection, the 300 largest companies by market capitalisation are removed; weighting, which is conducted on the basis of cash dividends paid. There is a two percent cap to any single constituent and a 25 percent cap to any sector.
Finally, volume screen is also taken into account. Also, WisdomTree’s process is sensitive to the liquidity of underlying constituents to ensure that constituents with larger weights can support those bigger exposures.
Christopher Gannatti, WisdomTree head of research in Europe said: “We think Japanese small-caps provide the purest way to tap into the local economic growth prospects. After decades of deflation, deleveraging and demand contraction, Japan’s domestic demand is now driving growth.
“With the Yen searching for a firm direction over the past few years, many investors have been uncertain as to the best way to invest in Japanese equities. If investors want to try to side-step the Yen’s movements and benefit from growth within Japan, small-caps can offer a potential, domestically-focused opportunity.”
WisdomTree Investments, Inc., through its subsidiaries in the US, Europe and Japan, is an ETF and ETP provider. The firm currently has approximately $60.7 billion, as at 10 July 2018 in assets under management globally.