Through ETFs, iShares has long offered exposure to equity markets like Canada and Italy. Soon, the firm will provide access to an even larger market. Texas.
After the market closed on Friday, the largest provider of ETFs filed regulatory documents for a new fund. The iShares Texas Equity ETF. We expect it to launch during the summer of 2025.
While iShares has increasingly been rolling out actively managed ETFs, the iShares Texas Equity ETF will track an FTSE Russell index. According to a BlackRock spokesperson, Texas is home to 1 in 10 publicly traded companies in the U.S. Texas would be the eighth-largest economy in the world on a standalone basis.
Texas is Home to Many Companies
More than 100 companies, including Charles Schwab, Hewlett Packard Enterprises, and Oracle, moved their headquarters to Texas between 2020 and 2023. For many people, myself included, Texas is associated with energy companies. For example, the Texas Capital Texas Oil ETF (OILT ) holds companies extracting oil and gas from Texas. Chevron, Diamondback Energy, EOG Resources, Exxon Mobil, and Occidental Petroleum. VettaFi expects the pending iShares ETF to be diversified in sectors other than energy.
To be eligible for the Underlying Index, at each rebalance date, each security must be included in the Russell 3000 Index, have a float-adjusted market capitalization of $500 million or more, and have a three-month daily value traded of at least $3 million. Eligible securities of companies headquartered in the State of Texas, as determined by the Index Provider, are selected for inclusion in the Underlying Index and weighted by float-adjusted market capitalization.
The Underlying Index is reconstituted and rebalanced quarterly at the close of the fourth Friday in June and the third Friday of March, September, and December.
Regional US ETFs Have Occurred in the Past
The ETF industry has had regional U.S. ETFs before. The LocalShares Nashville Area ETF (NASH) comes to mind. NASH survived nearly five years before closing in early 2018 but struggled to cross the $25 million threshold. While I’m not making an assets under management prediction, I would expect the iShares brand and distribution would help their pending fund gain scale.
iShares Provides Targeted ETF Exposure
iShares also offers 60 single-country or regional international equity ETFs, including some with decades of trading history. The iShares MSCI Canada ETF (EWC ) launched in 1996 and has $2.5 billion in assets. Meanwhile, the iShares MSCI Kuwait ETF (KWT ) began trading in 2020 and has approximately $100 million in assets.
Equity ETFs are different from fixed income ETFs. However, iShares offers a pair of municipal bond ETFs focused on California and New York. These ETFs manage approximately $5 billion in assets spread across universities and public works.
We are interested in seeing what type of demand iShares incurs once it is deep in the heart of Texas.
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VettaFi LLC (“VettaFi”) is the index provider for OILT for which it receives an index licensing fee. However, OILT is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OILT .