Investing in small-cap stocks is a classic way to try to enjoy the early stages of economic recovery. The reasoning is simple: Small-caps tend to be more oriented towards national and less vulnerable economies with global economic trends than large firms. Investors are already doing, a great game U.S. small-caps - the Russell 2000 index hit a new record on 6 April, although it slipped slightly since. Now investors are more and more to be launched on the possibilities to invest in small-cap funds focus on foreign markets. One of the more recent arrivals: the Fund Market Vectors Russia Small - Cap Exchange - Traded (RSXJ) unveiled on 13 April.
The ETF is the fifth specific to each country or region specific Small-Cap Fund Van Eck Global has launched over the past two years. Rebound of the Russia of the financial crisis of 2008 has been slower than that of the emerging economies, but Van Eck sees encouraging signs for investors: credit expansion in progress, the beginning of the growth of real wages and a business climate sunny in Government promises to loosen restrictions on foreign investment. Other benefits include the need for an increase in infrastructure spending before the Russia hosts the 2018, World Cup, and General Electric (GE) entered into joint ventures with companies controlled by the State to produce equipment for energy systems and Russian health care. Bloomberg Businessweek spoke with Portfolio Manager Van Eck David Semple and Adam Phillips, General Manager of ETFs on the deployment and the general appeal of small-cap funds. The following is a transcript revised comments.
BBW: This is the second ETF small-cap that Van Eck was launched this month [the market vectors Germany Small-Cap ETF has become available April 4]. That could be considered as denier at a time when most strategists favour large cap for their greater exposure to the global economic recovery.
Adam Phillips: Van Eck was believed for a long time, is one of the best ways to capture exposure to an economy low capitalization of the stocks. Which is highlighted that come from different countries of the financial crisis at different speeds and for different reasons. Investors may or may not searching for names global mega-cap related to the global economy. They seek to their international equity allocations to capture compelling themes and stories in the emerging economies. And some of the BRICs [Brazil, Russia, India, China] come to mind. Some investors who want to be a little more tactical are more inclined to consider an ETF small cap which can provide more efficient access to a market given.
What convinced you that the time had come for an ETF small Russian capitalization?
David Semple: It is very simple to see where was the demand from investors. If you want that exposure to the strong increase of the tax expenditure taxes higher for Russian energy companies have made possible, but do not want to risk associated with major oil companies and gas, an ETF small-cap is a good alternative. And since the company-specific risk may be higher in Russia, a portfolio approach seems to agree many passive investors. UBS estimated last September that the relaunch of the Russia is now 7 to 8% of its domestic product gross. If you calculate the GDP with an average price of oil $75 per barrel, this stimulus comes to 100 billion dollars per year. It is all in the economy and is reflected in the low interest rates, increasing and more employees of public sector pensions. The Russia has won $ 1.5 trillion in exports of oil and natural gas from 2000 to 2010 and collected taxes worth a fair part of this.
