6 min readBy Ron Koren ETF Insider
How does the XSOE ETF work?
The XSOE ETF is a specialized investment fund that focuses on a specific sector. This exchange-traded fund offers investors exposure to a range of companies in this sector.
The XSOE issuer, WisdomTree, operates with a passive management strategy, employing an indexing approach to mirror the performance of its underlying index. This index, a modified float-adjusted market cap weighted index, focuses on common stocks in emerging markets while excluding those of state-owned enterprises. The index screening process is meticulous, involving criteria such as market capitalization, trading volume, and government ownership thresholds. Securities within the index are weighted using a modified market cap scheme to align with the composition of the pre-screening universe, with adjustments made to ensure sectoral and geographical diversification. Notably, WisdomTree utilizes the Global Industry Classification Standard (GICS®) to categorize companies within sectors, providing exposure across various industries. As of June 30, 2023, significant weightings were observed in sectors like information technology, consumer discretionary, and financials, with notable geographic exposure to China, India, and Taiwan. The fund's investment strategy closely mirrors the composition and weightings of the index it tracks, with a commitment to maintaining diversification and alignment with market trends.
XSOE Dividend, an offering by WisdomTree, is designed with a focus on delivering dividend-oriented investment opportunities within emerging markets. Leveraging WisdomTree's expertise in passive management, the fund tracks an index that selects dividend-paying companies in emerging markets while excluding state-owned enterprises. Employing a meticulous screening process, the index targets companies with substantial market capitalization and trading volume, ensuring robust liquidity and stability. Moreover, the index weighting methodology prioritizes dividends, providing investors with exposure to companies demonstrating strong dividend potential. With a commitment to delivering consistent income generation from emerging market equities, XSOE Dividend offers investors a strategic avenue to access dividends while navigating the dynamic landscape of emerging market investments.
XSOE Tracking, a product of WisdomTree, epitomizes a meticulous approach to passive investment management, aiming to closely mirror the performance of its underlying index. This index, meticulously constructed by WisdomTree, screens and selects companies within emerging markets, excluding state-owned enterprises, to offer investors exposure to high-growth potential while mitigating certain risks. Utilizing a representative sampling strategy, the fund strives to replicate the risk and return characteristics of the index, ensuring alignment with investors' objectives. Employing a modified float-adjusted market cap weighting scheme, XSOE Tracking adjusts the weight of index securities to reflect the composition of the pre-screening universe while maintaining diversification across sectors and geographies. With a commitment to transparency and efficiency, XSOE Tracking provides investors with a reliable avenue to access the growth opportunities offered by emerging markets while minimizing tracking error and maximizing returns over the long term.
XSOE Correlation, offered by WisdomTree, stands as a testament to the pursuit of correlation efficiency within emerging market investments. Leveraging a passive management strategy, this product endeavors to closely track the performance of its underlying index, which comprises carefully selected emerging market companies excluding state-owned enterprises. With a meticulous screening process, the index aims to capture the market's performance while mitigating specific risks associated with state involvement. Employing a modified float-adjusted market cap weighting scheme, XSOE Correlation adjusts the weight of index securities to align with the pre-screening universe, thereby fostering correlation stability. By emphasizing transparency and systematic investment methodologies, XSOE Correlation provides investors with a reliable tool to navigate the complexities of emerging markets while minimizing correlation risk and maximizing portfolio diversification.
XSOE Sector, a product of WisdomTree, offers investors targeted exposure to sectors within emerging markets through a systematic and transparent investment approach. Leveraging WisdomTree's expertise in passive management, this fund tracks an index that selects companies from emerging markets, excluding state-owned enterprises, while organizing them by sector. Employing a rigorous screening process, the index identifies companies with substantial market capitalization and trading volume, ensuring robust representation within each sector. Utilizing the Global Industry Classification Standard (GICS®), XSOE Sector provides investors with access to a wide range of sectors, including communication services, consumer discretionary, energy, financials, and more, allowing for strategic sector allocation within emerging market portfolios. With a commitment to sector diversification and transparency, XSOE Sector offers investors a reliable avenue to capitalize on sector-specific opportunities within the dynamic landscape of emerging markets.
XSOE Exposure, an offering by WisdomTree, provides investors with comprehensive exposure to emerging market equities through a systematic and transparent investment approach. Leveraging WisdomTree's expertise in passive management, this fund tracks an index meticulously crafted to capture the performance of emerging market companies, excluding state-owned enterprises. Employing a stringent screening process, the index selects companies with substantial market capitalization, trading volume, and geographic diversity across emerging market countries. XSOE Exposure offers investors a diversified portfolio that spans various sectors and industries within emerging markets, providing access to high-growth potential while mitigating certain risks associated with concentrated exposure. With a commitment to transparency and efficiency, XSOE Exposure serves as a reliable vehicle for investors seeking broad exposure to emerging market equities, aligning with their long-term investment objectives.
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