Global X switches underlying index for Portugal ETF

Dec 6th, 2016 | By | Category: Equities

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New York based Global X Funds has announced that, as of 6 December 2016, the Global X FTSE Portugal 20 ETF (NYSE: PGAL) will track the MSCI All Portugal Plus 25/50 Index.

Global X switches underlying index for Portugal ETF

Global X Funds has switched index providers on its Portugal ETF from FTSE Russell to MSCI.

The index is designed to represent the performance of the broad Portugal equity universe. This includes securities that are classified in Portugal according to the MSCI Global Investable Market Index methodology, together with companies that are headquartered or listed in Portugal and carry out the majority of their operations in Portugal.

The fund’s previous index, the FTSE Portugal 20 Index represents the performance of the 20 largest Portuguese listed companies ranked by full market capitalization.

In contrast, the MSCI All Portugal Plus 25/50 Index, selects a minimum of 20 securities and weights constituents according to their free float market capitalization. The index also applies capping as per MSCI’s 25/50 Index Methodology, which ensures no issuer has a weight above 25%, and the sum of weights of all issuers with weights above 5% should not exceed 50%. This is done to minimize index turnover, tracking error and extreme deviation from the parent index. The index is rebalanced quarterly in February, May, August and November.

As of 30 November 2016 the fund’s new index has 21 constituents. It is dominated by two single holdings – Galp Energia (23.2%), making up the index’s entire allocation to the energy sector; and EDP Energias De Portugal (21.5%). This is however only a slightly higher allocation to these firms compared to the FTSE Portugal 20 Index which had Galp Energia at 21.8% and EDP at 18.9%.

The largest sector exposures of the MSCI All Portugal Plus 25/50 Index are to utilities (29.1%), energy (23.2%), materials (12.1%), industrials (9.4%) and consumer staples (8.8%). This is broadly comparable to the largest sector exposures for the FTSE Portugal 20 Index which are utilities (27.8%), oil & gas (21.8%), retail (14.0%), basic resources (11.0%), and banks (8.5%).

As of 30 November 2016 the MSCI All Portugal Plus 25/50 Index is down 13.9% per annum over the past three years although this is superior performance compared to its benchmark, the MSCI Portugal Index, which is down 15.9% per annum over the same period.

global-x-msci-portugal-index

Source: MSCI.

The fund, which is the only Portugal-focused ETF in the United States, will be renamed the Global X MSCI Portugal ETF.

Its total expense ratio is 0.62%.

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