Looking Beyond the Usual Suspects in Emerging Market ETFs
August 31st, 2012 at 2:07pm by Tom Lydon
More investors are adding emerging market exchange traded funds to their portfolios as a part of a diversified allocation strategy. Still, most tend to focus on the largest products out there, ignoring other potentially favorable investment opportunities.
The iShares MSCI Emerging Index Fund (NYSEArca: EEM) and the Vanguard Emerging Markets ETF (NYSEArca: VWO) have been the de facto, go-to investments for emerging market exposure as they both track the widely monitored MSCI Emerging Markets Index. [Three Emerging Market ETFs on an Uptrend]
The iShares Emerging Market fund has a 0.67% expense ratio and has 840 holdings. The ETF is up 5.1% year-to-date.
EEM’s sector allocations include financials 24.3%, information tech 13.5%, energy 13.0%, materials 11.4%, consumer staples 8.7%, telecom 8.3%, consumer discretionary 8.3%, industrials 6.7%, utilities 3.8% and health care 1.3%. Country allocations include China 17.0%, South Korea 15.4%, Brazil 13.1%, Taiwan 10.8%, South Africa 8.0%, India 6.4%, Russia 6.1%, Mexico 4.9%, Malaysia 3.8%, Indonesia 2.7%.
The Vanguard Emerging Market fund has a 0.20% expense ratio and has 901 holdings. The fund is up 5.4% year-to-date.
VWO’s sector allocations include financials 23.3%, tech 14.6%, basic materials 12.7%, consumer cyclical 8.0%, real estate 1.9%, communication services 8.2%, energy 11.5%, industrials 7.6%, consumer staples 8.0%, health care 1.0% and utilities 3.4%. Country allocations include China 17.4%, Korea 15.2%, Brazil 15.1%, Taiwan 10.9%, South Africa 7.4%, India 7.3%, Russia 7.1%, Mexico 4.4%, Malaysia 3.2%, Indonesia 2.8% and Thailand 2.0%.
Nevertheless, investors have other ETF options available, including:
The Powershares BLDRS Emerging Markets 50 ADR Index Fund (NYSEArca: ADRE) tracks the BNY Mellon Emerging Markets 50 ADR Index, which is comprised of 50 depositary receipts. ADRE has a 0.30% expense ratio and has 50 holdings. The fund is up 0.2% year-to-date.
The PowerShares emerging market ETF’s sector allocations include consumer discretionary 1.5%, consumer staples 8.2%, energy 22.8%, financials 16.7%, info. tech. 13.7%, materials 15.2%, telecom services 19.5% and utilities 2.4%. Top country allocations include Brazil 34.8%, China 17.7%, Taiwan 10.8%, Mexico 9.9%, South Korea 6.4%, India 5.1%, South Africa 5.0%, Hong Kong 3.4%, Colombia 2.0% and Chile 1.3%.
The Schwab Emerging Markets Equity ETF (NYSEArca: SCHE) follows large- and mid-cap stocks from the FTSE All Emerging Index. SCHE has a 0.25% expense ratio and has 621 holdings. The ETF is up 4.5% year-to-date
The Schwab emerging market fund’s sector allocations include financials 26.9%, energy 13.6%, materials 12.4%, telecom services 9.4%, info. tech. 8.7%, industrials 8.3%, consumer staples 7.99%, consumer discretionary 7.4%, utilities 4.1% and health care 1.3%. Country allocations include China 17.3%, Brazil 16.4%, Taiwan 12.6%, South Africa 10.8%, India 8.8%, Russia 6.1%, Mexico 6.0%, Malaysia 4.9%, Indonesia 2.7% and Thailand 2.5%.
The SPDR S&P Emerging Markets ETF (NYSEArca: GMM) tries to reflect the performance of the S&P Emerging BMI Index. GMM has a 0.59% expense ratio and has 604 holdings. The fund is up 4.6% year-to-date.
The SPDR ETF’s sector allocations include financials 22.4%, energy 15.6%, info. tech 11.6%, materials 10.6%, consumer staples 9.5%, telecom services 8.9%, consumer discretionary 8.4%, industrials 5.8%, utilities 2.9% and health care 1.3%. Top country allocations include: China 19.7%, Brazil 14.2%, Taiwan 11.8%, South Africa 10.8%, Russia 9.3%, India 7.5%, Mexico 6.7%, Malaysia 4.0%, Indonesia 3.3%, Thailand 2.5%, Chile 2.3% and Turkey 1.9%.
The SPDR MSCI EM 50 ETF (NYSEArca: EMFT) follows the largest emerging market stocks from the MSCI Emerging Markets Index by market-cap. EMFT has a 0.50% expense ratio and currently has 56 holdings. The fund launched on Feb. 27, 2012, and it is up 4.0% over the past three months.
EMFT’s sector allocations include financials 23.0%, info tech 22.1%, energy 19.3%, telecom services 12.3%, materials 10.5%, consumer discreitonary 7.3%, consumer staples 4.3% and industrials 0.7% – it should be noted that Samsung accounts for 9.3% of the overall allocations. Country allocations include China 25.8%, South Korea 21.1%, Brazil 14.3%, Taiwan 10.7%, Russia 10.6%, South Africa 9.7%, Mexico 5.2% and India 2.6%.
Additionally, investors may consider an equal-weight exposure to the overall emerging markets, which provides a heavier emphasis on small- and mid-cap stocks, compared to the previously mentioned ETFs.
The Guggenheim MSCI Emerging Markets Equal Weight ETF (NYSEArca: EWEM) tries to reflect the performance of the MSCI Emerging Markets Equal Weighted Index. EWEM has a 0.71% expense ratio and has 474 holdings. The ETF is up 4.5% year-to-date.
The Guggenheim ETF’s sector allocations include financials 19.3%, materials 13.5%, industrials 13.5%, info. tech. 9.2%, consumer discretionary 8.2%, consumer staples 6.5%, energy 6.2%, telecom services 5.7%, utilities 4.0% and health care 1.2%. Top country allocations include China 17.3%, South Korea 17.0%, Taiwain 14.8%, Brazil 8.4%, India 8.2%, South Africa 7.3%, Turkey 3.6%, Malaysia 3.2%, Thailand 3.1%, Russia 3.0%, Indonesia 2.9% and Mexico 2.4%.
For more information on emerging market countries, visit our emerging markets category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.