Consumer Focus Powers Emerging Market ETF’s Outperformance

September 4th at 10:37am by John Spence

An emerging market ETF that focuses on the consumer sector has established an impressive three-year track record that could attract more investors and financial advisors.

EGShares Emerging Markets Consumer ETF (NYSEArca: ECON) has outperformed the MSCI Emerging Markets Index since the fund launched in September 2010.

Through the end of June, ECON had posted a cumulative return of 29.3% since inception, compared with a loss of 2.5% for the MSCI Emerging Markets Index, according to Emerging Global Advisors, the ETF’s manager.

Emerging market domestic spending is expected to hit $30 trillion a year by 2025. [Emerging Market ETF Sees Rare Inflows]

“The sectors that benefit most from emerging market demographics trends tend to be underrepresented in conventional, broad-based emerging market benchmark indices, which are usually dominated by export sectors and banks,” said Marten Hoekstra, chief executive of Emerging Global Advisors. “Emerging market consumer demand represents a key theme for investors and ECON is the largest and longest standing ETF to obtain that exposure.”

The fund lets emerging market investors position for a growing middle class and younger generation of consumers. [New Dividend ETF for Emerging Markets]

“The investment thesis behind this fund is a logical one: Emerging-markets consumers increasingly are reaching middle-class status and have more disposable income to spend on everything from cars and electronic gadgets to processed foods and beverages,” Morningstar senior fund analyst Patricia Oey wrote in a profile of ECON. “Other growth drivers include the rise of consumer credit, urbanization, and relatively young populations in a number of emerging markets. Personal incomes are growing rapidly as well.” [EGShares Could Self-Index Its ETFs]

ECON has grown to over $1 billion of assets. The ETF has gathered $367 million of inflows this year while emerging market equity ETFs overall have seen about $11.6 billion of net outflows, according to Emerging Global Advisors.

ECON has outperformed the MSCI Emerging Markets Index this year by losing less. However, ECON’s performance edge has slipped over the past month.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. 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.

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