To show how a little bit of effort can reveal significant differences, let’s look at three China funds: (FXI) (by Barclays Global Investors), (GXC) (by State Street Global Advisors) and (CAF) (by Morgan Stanley Institutional).

All three come up as China funds when you search on popular sites such as ETFconnect. Simply reading the ETFconnect product descriptions starts to give a picture of possible important differences between the funds.

FXI
The Fund seeks investment results that correspond generally to the price and yield performance before fees and expenses of the FTSE/Xinhua China 25 Index.

GXC
The investment objective of the Fund is to replicate as closely as possible, before fees and expenses, the total return performance of an equity index based upon the Chinese composite market. The Fund uses a passive management strategy designed to track the total return performance of the S&P Citigroup BMI China Index. The Index is a market capitalization weighted index that defines and measures the investments in universe of publicly traded companies domiciled in China, but legally available to foreign investors. The Fund utilizes a sampling methodology in the purchasing the stock to achieve its objective.

CAF
The Fund seeks capital growth. The Fund achieve its investment objective by investing, at least 80% of its assets in A-shares of Chinese companies listed on the Shanghai and Shenzhen stock exchanges. The Fund may invest up to 15% of its net assets, in warrants, structured investments or other Strategic Transactions. The Fund is the first U.S. registered investment company that will invest principally in China A-shares. The Fund may also invest up to 20% of its assets in other types of investments, including B-shares of companies listed on the Shanghai and Shenzhen stock exchanges.

From these descriptions we are alerted to the fact that the funds take a different approach.

You see that FXI and GXC seek to replicate the performance of particular but different indices. They are passive. CAF does not seek to replicate the performance of an index. It is active.

FXI invests in a small number of companies and fully replicates the holdings of its benchmark index. GXC seeks to replicate performance through sampling of holdings in its benchmark index which has more constituents than the FXI benchmark index.

FXI and GXC invest in common stocks, whereas CAF can invest in equity securities other than common stocks.

The next thing you need to know is what the benchmark indices or authorized share types are all about:

By going to the FTSE/Xinhua and the S&P Global Indices websites, we can learn first that the full name of the S&P index is S&P/Citigroup BMI China ex A-B Shares Index. Then we learn that the FTSE/Xinhua invests in H-Shares and Red Chip Shares, whereas the S&P Citigroup BMI China ex A-B Shares Index invests in H-Shares, Red Chip Shares, and Chinese companies listed in the United States, Singapore and Japan. We already know from the CAF description that it invests in A-Shares and B-Shares (plus possibly some other types of investments, presumably in China).