Founded in 2007, the First Trust ISE Chindia Index Fund ETF (FNI) looks to invest in promising businesses that are based in the emerging market countries of China and India.
After falling below $9 in early 2009, this exchange-traded fund (ETF) has since recovered 240% from that low and today is invested in some of the biggest names in Eastern markets. Objectively speaking, FNI looks to evenly split its asset allocations between opportunities in China and India.
The index which FNI follows, the ISE Chindia Index, compiles a semi-annual list of any Chinese or Indian companies whose American depository receipts (ADRs) are listed on a U.S. securities exchange and then ranks these companies based on liquidity. The top 25 most liquid stocks from each country are selected to be part of the index, meaning that no more than 50 positions are in the index at any one time.
Although FNI is incorporated in the United States and seeks companies listed on U.S. exchanges, this is the extent of the fund’s association with America. Indeed, 100% of the fund’s assets are allocated outside of the United States, a fact that makes FNI a potential “escape route” for investors looking to sit out the uncertain and volatile near-term future of U.S. markets. FNI is heavily invested in the technology (38%), consumer cyclicals (24%) and financial (17%) sectors of India and China.
With just $160 million in managed assets, FNI is by no means a huge ETF. However, its available funds have been allocated extensively to many of the companies at the forefront of helping to build these emerging markets. Top holdings include e-commerce company Alibaba (BABA), 8.19%; JD.com, Inc. (JD), 7.5%; ICICI Bank, Ltd. (IBN), 6.9%; China’s equivalent of Google — Baidu, Inc. (BIDU), 6.67%; and internet technology company NetEase (NTES), 5.7%.
As continued evidence of the strength of emerging markets in 2016, FNI has outperformed the S&P 500 so far this year, returning 7.7% year to date despite a $1-$2 fall in the last month or so. In September, FNI paid out its highest dividend in more than three years, amounting to a 0.9% per share payout annually, an encouraging indication that insiders believe FNI has good management, financials and room for future growth. The fund’s expense ratio currently stands at 0.60%.
In summary, FNI is an alternative emerging markets fund that offers American investors easy access to some of the most influential companies in India and China. If you are worried about how the election will affect U.S.-based markets over the coming months, or are interested in trying to ride the bullish trend in emerging markets, it may be worth your while to examine the First Trust ISE Chindia Index Fund ETF (FNI) more closely.
