BlueStar Indexes and the Related ETFs – ITEQ and IZRL

BlueStar is worth to take a note on because the founder and CEO is Steven Schoenfeld, who was the author of Active Index Investing (Wiley Finance, 2004), co-author of The Pacific-Rim Futures and Options Markets (McGraw-Hill, 1992), and co-founder of ETF.com. He is a legendary pioneer in index investment community.

BlueStar currently produces six indexes for Israel, five stock indexes and one bond index. BlueStar takes a global approach to investing in Israel by considering Israeli companies listed worldwide for inclusion in our strategies. BlueStar’s founder and Chief Investment Officer, Steven Schoenfeld, conceived the idea of BlueStar in 2010 and put his plan into action by launching the firm in 2011 with the support of co-founders and strategic advisers. BlueStar recognized early on that despite Israel’s compelling investment case there was a lack of actual investment in Israeli assets by global investors resulting in latent demand for investing in Israel.

From their website, you can see there is only one ETF in the press release – BlueStar TA-BIGITech™ Israel Technology ETF(ITEQ), launched on November 3, 2015. It tracks TASE-BlueStar Israel Global Technology Index, the first and only benchmark following a broad, deep and complete range of major Israeli tech companies listed on five exchanges worldwide (TASE, NASDAQ, NYSE, London Stock Exchange and the Singapore Exchange).

ITEQ is an obvious success. It has since accumulated $40.48 million AuM and expense ratio of 0.75%. The basic requirement of stock inclusion is one of the following: at least 20% of the company’s employees located in Israel, 20% of long-lived assets located in Israel, or have a major R&D center in Israel. Other considerations include tax status, incorporation, or management domiciled within Israel. The fund approaches its sector focus with similar breadth, including companies categorized as healthcare, biotech, life sciences, aerospace, clean energy, and agri-tech. To further filter out tech firms, I assume they have to leverage industry classification system, likely would be GICS, but RBICS sure can offer better results.

Its annualized return is above 12%. There is 74 holding stock at present, interestingly, the largest country exposure is the US, the second is Israel.

ARK Israel Innovative Technology ETF(IZRL) is often quoted as the comparable product to ITEQ. It’s issued to the market two years later – end of 2017, and since has raised $20 million, almost half of ITEQ. IZRL’s expense fee is much lower at 0.49%. It has 42 holdings. IZRL tracks ARK Israeli Innovation Index, which is equal weighted, based on Israeli technology sectors.

The major difference between IZRL and ITEQ is that IZRL targets only companies that are incorporated or domiciled in Israel, while ITEQ’s geographic composition is more diversified. As a result, the performance of IZRL is much poorer compared to ITEQ.

(Note: sourced from its website: https://bluestarindexes.com/news/)

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