Source is launching a new Russian equity ETF, tracking the Vienna Stock Exchange’s RDX index.

According to the Vienna exchange’s website, the RDX consists of the 15 most liquid depositary receipts on Russian shares on the London Stock Exchange, with the largest weightings in Gazprom (25%), Lukoil (15%), Rosneft (13%), Norilsk Nickel (9%) and Tatneft (5%). The index, NAV and trading currency is US dollars.

Source highlights that its new fund, the RDX Source ETF, will pay quarterly dividend distributions as a way of mitigating the inefficiencies that arise from the typically long periods between dividend announcement and payment dates in Russia, and from the frequent discrepancies between the levels of announced and paid dividends.

Source’s ETF will compete with five existing European ETFs tracking Russian equities. Lyxor and EasyETF have funds tracking the Dow Jones Russia Titans 10 index, db x-trackers and Comstage have funds tracking the MSCI Russia index (albeit with different caps on maximum stock weightings) and MarketAccess tracks the DAXglobal Russia index. Lyxor’s ETF has by some margin the largest funds under management, with €531 million invested. The existing Russia ETFs are available to investors at between 60 and 70 basis points in annual fees and Source has priced its ETF in the middle of this range, at 65 b.p.

IndexUniverse.eu covered Russian index-based equity investing, with a look at index concentrations, in a recent feature.

Russia was the second best performing equity market in the world in 2009, with the leading domestic equity benchmark indices, the MICEX and the RTS, rising by 121% and 129%, respectively. Despite this, Source points out, Russia is often seen as the “poor relation” of the BRIC countries as far as ETF investors are concerned, with substantially less invested in the market than in Brazil, India or China.