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ETF BET Patria-Tradeville vs iShares FM: Which is the best ETF for BSE investors?

10 minutes
intermediate
Cristian Cochintu
Cristian Cochintu
12 April 2024

Even in the world of ETFs, where the stakes are massively lowered by inherent diversity, there’s debate as to which fund will be the more lucrative long-term play. In this article we will put in the mirror the most popular ETFs for the Romanian Stock Market: ETF BET Patria-Tradeville (TVBETETF) and iShares Frontier and Select EM ETF (FM).

Exchange-Traded Funds (ETFs) that offer exposure on Bucharest Exchange Traded Index (BET) are a popular choice for Romanian investors seeking to build a diversified portfolio. Two well-known examples are TVBETETF (ETF BET Patria-Tradeville) and FM (iShares Frontier and Select EM ETF). Often generally referred to as "BET ETF", these investments aim to offer exposure to the top stocks listed on the Bucharest Stock Exchange (BSE).

Even though TVBETETF and FM are offering exposure to the same index, they are not identical at all in their structure or operation. There are notable differences between that include the BET stocks weight in the fund, liquidity, and the fund management's approach. These can significantly influence your choice between these two funds.

But which is better? Let’s dig deeper into TVBETETF and FM to find out which of the two may suit better to your needs.

ETF BET Patria-Tradeville (TVBETETF)

ETF BET Patria-Tradeville is the first ETF listed on the Bucharest Stock Exchange (August 2012) and aims to replicate the evolution and performance of the main index of the Bucharest Stock Exchange, BET. The fund can be traded through any intermediary authorized to trade on the BVB under the ticker TVBETETF and is one of the most liquid issuers listed on the Romanian stock exchange.

The fund adopts a passive investment strategy whereby the manager (Patria Asset Management) seeks to replicate the structure and performance of the BET index. The index is calculated as a weighted average of the price of a basket of major listed stocks and reflects the overall performance of the stock market. The Fund invests in the 20 largest Romanian listed companies in various sectors. This is an accumulating fund, with dividends received from the issuers in the portfolio being reinvested.

According to Patria Asset Management, given that the fact that ETF BET Patria-Tradeville is a passively managed fund that seeks to replicate the market index, whose evolution is cyclical, the fund is more suitable for long-term investments, with a minimum recommended horizon of investing in the ETF units of 3 to 5 years.

TVBETETF Holdings

In terms of holdings, ETF BET Patria-Tradeville replicates the BET Index, which means that an investment in TVBETETF gives you access to a broad range of sectors, from energy and banking to halthcare and real estate, and companies such as Hidroelectrica (BVB: H2O), OMV Petrom (BVB: SNP), Banca Transilvania (BVB: TLV), and Romgaz (BVB: SNG).

Here’s a breakdown of TVBETETF’s top holdings:

TVBETETF_holdings.PNG

Source: patriafonduri.ro

ETF BET Patria Performance

According to a BVB release the fund reached assets of 220.5 million lei in mid-March 2024, a +13x growth over the last three years. The number of investors in the fund has also increased more than 12-fold in those three years, from 1,483 at the end of February 2021 to 18,265 investors in February 2024. The fund's yield was 33.4% in 2023 and 69.6% over the last three years.

ETF_BET_Patria_Tradeville_chart.png

Source: bvb.ro

At the end of 2023 fund's manager announced a cut in the fund's operating costs, including the management fee from 1.2% to 0.9% per annum.

iShares Frontier and Select EM ETF (FM)

iShares Frontier and Select EM ETF (FM) listed at NYSE Arca, was launched in September 2012 and is an ETF powered by BlackRock, Inc.

The fund provides exposure to frontier and, to a lesser extent, emerging markets. The fund invests in equities and/or depositary receipts issued by companies economically tied to frontier and emerging countries. Though actively managed, the fund utilizes the MSCI Frontier and Emerging Markets Select Index as its benchmark for defining the investable universe.

The fund stretches across all market-caps but selects the lower spectrum for emerging countries. The portfolio is constructed using optimization techniques relative to the benchmark while taking into account regulatory requirements, market limitations, and repatriation restrictions. The fund may hold derivative instruments at the adviser's discretion.

Prior to March 1, 2021, the fund was called iShares MSCI Frontier 100 ETF and tracked the MSCI Frontier Markets 100 Index. On June 1, 2023, the fund went from tracking the MSCI Frontier and Emerging Markets Select Index to being actively managed, dropping the MSCI reference on its name.

With a total of over $450 million in AUM (assets under management), the fund may be suitable for Romanian and foreign investors seeking liquid and diversified exposure to a basket of 11 top companies listed on the Bucharest Stock Exchange (+10% weight in the fund), with OMV Petrom shares being among the top holdings.

iShares FM ETF Holdings

FM's portfolio is diversified, comprising around 175 stocks from various frontier and emerging markets. The fund's holdings span across countries including Romania, Vietnam, Kazakhstan, Bahrain, Bangladesh, Colombia, Egypt, Estonia, Jordan, Kenya, Lithuania, Morocco, Nigeria, Oman, Pakistan, Peru, Philippines, and Sri Lanka. FM is the international ETF with the largest exposure and the largest number of shares listed on the Bucharest Stock Exchange. Ordered based on their weight in the fund, these are: OMV Petrom (SNP) - 2.35%, Hidroelectrica (H2O) - 2.23%, Banca Transilvania (TLV) – 2.23%, Romgaz (SNG) – 1.24% and BRD - Groupe Societe Generale (BRD) – 0.56%.

In terms of fund`s top holdings, we have:

JSC KASPI KZ GLOBAL SPONSORED ADS (8.99%): This is a Kazakhstan-based company involved in the e-commerce industry.
BLK CSH FND TREASURY SL AGENCY (4.13%) - This is BlackRock Cash Funds investing at least 99.5% of its total assets in cash, U.S. Treasury bills, notes and other direct obligations of the U.S. Treasury.
JOINT STOCK COMPANY NATIONAL GDR (3.04%): This Kazakhstani company operates in the oil and gas sector.
HOA PHAT GROUP (3.03%): This Vietnam-based group operates in the industrial sector, with a specific focus on steel manufacturing.
COMMERCIAL INTERNATIONAL BANK EGYP (2.44%): As the name suggests, this is a commercial bank based in Egypt.
PETROM SA (2.35%): The biggest Romanian company in Crude Petroleum and Natural Gas extraction.

Note: Holdings are subject to change

FM ETF Performances 

Below chart shows the fund’s performance as the percentage of loss or gain per year over the last 10 years against its benchmark. It can help you to assess how the fund has been managed in the past and compare it to its benchmark.

Performante_FM.PNG

Source: ishares.com

The FM ETF has an expense ratio of 0.79%, which is considered in the average range of actively managed funds.
In terms of overall price evolution, FM has manifested more volatility than TVBETETF given the small-cap nature of its own holdings.

iShares MSCI Frontier and Select EM ETF Chart

TVBETETF vs FM - Key differences and similarities

When comparing the differences between ETF BET Patria – Tradeville and iShares FM, it is crucial to identify their commonalities and differences as they might have a significant impact on your investment decision.

TVBETETF and FM have a different Strategy

While TVBETETF uses a passive investment approach, intending to mirror the performance of the BET Index, FM has an active management approach, utilizing optimization techniques relative to the benchmark, MSCI Frontier and Emerging Markets Select Index, to navigate the challenges and opportunities presented by these markets.

 Both TVBETETF and FM are viable long term holds

While diversification across many more holdings and countries may present FM as less vulnerable to geopolitical, currency, and governance risks associated to a single country, both ETFs are viable long-term investment strategies. If emerging markets are taking off again, many investors might be glad to have any of these funds in their portfolio.

TVBETETF and FM have similar expense ratios

In general, an expense ratio of 0.90% vs 0.79% won’t make a massive dent in your bottom line. However, considering that ETF BET Patria-Tradeville is a passive funds, in contrast with iShares FM, which is an actively managed fund, there could be investors that consider FM as a better positioned fund from fees perspective.

FM is unquestionably more diverse

FM has 171 holdings across 12 sectors. By contrast, TVBETETF has just 20 holdings across 11 sectors.
FM largest sector allocation comes in at “just” 33.60% in Financials. Materials, Real Estate, Energy, and Cash and/or Derivatives all make up the top five. TVBETETF, on the other hand, is mostly oriented to energy and financial industries, which cover around 80% of BET Index weight.

TVBETETF vs FM - Income and Dividends

When it comes to income and dividends the FM ETF focuses on investments in frontier and select emerging markets, offering potential for growth but with a unique dividend distribution profile. Unlike many dividend-focused ETFs, FM's primary objective is not income generation but rather capital appreciation in these less mature and less liquid markets. As such, dividend distributions for FM can vary significantly based on the individual dividend policies and performances of companies within the fund's portfolio. 
On the other hand, TVBETETF is an accumulating fund, with dividends received from the issuers in the portfolio being reinvested.

Which is better: ETF BET Patria Tradeville (TVBETETF) or iShares Frontier and Select EM ETF (FM)

In general, before picking an ETF to invest in, you need consider your investing goals and risk tolerance, ETF’s performance, and any associated costs. A deep research can give you the confidence you need to pursue the right ETF to invest in the Romanian stock market.

In addition to the objective ETF selection criteria, there might be also factors whose evaluation is subjective. In these selection criteria, whether a particular ETF feature is desirable or not depends on your individual needs and preferences.

ETF BET Patria Tradeville (TVBETETF) may suit better to the average domestic investors with a long term investment strategy focused on Romanian stock market specifically.

You may want to invest in Romanian stock market through ETF BET Patria Tradeville (TVBETETF) if:

  • You want to invest through a fund that replicates the average performance of the Romanian stock market;
  • You aim for an indirect exposure to the performance and growth of the companies included in BET Index;
  • You are looking to invest in an accumulating ETF which reinvests the dividends received from portfolio companies (which may result in additional returns for investors);
  • You are looking for an ETF that allows you to invest very small amounts, equivalent to a single fund unit;
  • You are prepared to commit to a long-term investment with an above average ETF expense ratio for a passive fund.

In contrast, iShares Frontier and Select EM ETF (FM) may be tailored for investors that are seeking a global exposure to emerging markets, alongside with partial exposure on top 11 BSE stocks (+10% current fund weight).

You may want to invest in Romanian stock market through iShares FM ETF if:

  • You want to invest through a NYSE listed, actively managed fund powered by a top fund manager, i.e BlackRock Inc.;
  • You want to access fund’s unique exposure to frontier and select emerging markets;
  • You are looking for a niched fund with access to markets that are often overlooked by investors;
  • You prefer a portfolio with partial exposure to the BET index, along with other top emerging markets such as Kazakhstan, Morocco, Egypt, Philippines, Bangladesh etc;
  • You are willing to take on higher risk for potentially higher returns.

By applying some filters on your ETF screening routine, you’ll be able to easily dial up a selection of ETFs suitable for your needs. Then you can zoom in on the fine details using individual ETF overviews and mop up any extras on the provider’s prospectus.
Overall, investing in either TVBETETF or FM allows you to diversify your portfolio with shares of some of the largest and most influential companies in Romania. Keep in mind that investing always involves risks, and it's important to thoroughly research and consider your options before making a decision.

Free Resources

Before you decide what is the best BET ETF for your needs, consider using the educational resources we offer like CAPEX Academy or a demo trading account. CAPEX Academy has lots of trading and investing courses for you to choose from, and they all tackle a different financial concept or process – like the basics of analyses – to help you to make more-informed investment decisions.

Our demo account is a suitable place for you to learn more about leveraged trading, and you’ll be able to get an intimate understanding of how CFDs work – as well as what it’s like to trade with leverage – before risking real capital. For this reason, a demo account with us is a great tool for investors who are looking to make a transition to leveraged trading.

Sources:
https://www.patriafonduri.ro/fonduri
www.blackrock.com/us/individual/products/239649/ishares-msci-frontier-100-etf
https://bvb.ro/

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Cristian Cochintu
Cristian Cochintu
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Cristian Cochintu writes about trading and investing for CAPEX.com. Cristian has more than 15 years of brokerage, freelance, and in-house experience writing for financial institutions and coaching financial writers.