iShares has filed with the Securities and Exchange Commission (SEC) to launch the following ETFs:

• iShares Emerging Markets Financial Sector ETF
• iShares Emerging Markets Materials Sector Index Fund

A large inflow of assets into emerging markets signals that the timing could be right for the launch of these funds. Last month, about $1.76 billion in net inflows was seen by iShares MSCI Emerging Markets (NYSEArca: EEM). Likewise, Vanguard Emerging Markets (NYSEArca:VWO) saw $2.2 billion in net inflows in the same period.

There are three levels of concentration as far as emerging markets are concerned. The first level of concentration to consider is location. Broad emerging-markets funds such as EEM and VWO diversify assets over a handful of emerging markets, says Don Dion for The Street. It is necessary to make sure there is not a lot of cross-exposure taking place.

Secondly, beware of over-concentrated holdings. Ideally, the top holding should not make up more than 10% of holdings. If you are looking to purchase a fund with larger concentrations, make sure to monitor those holdings in particular. A large component can have a large impact on your portfolio. (Why stop losses matter).

Last, make sure to check out the sector components. If an over-allocation to financials or energy is selected, then the fund may become too volatile and diversification is not going to be as promising.

iShares’ filing is just the latest in growing interest in emerging markets. Both Global X (Check out their new ETFs) and Emerging Global Shares (See their latest offerings) have added to their line-up of emerging market offerings. PowerShares has the PowerShares Emerging Markets Infrastructure (NYSEArca: PXR), as well. It’s up 86.3% year-to-date.

Now that the many broader developing regions and countries have been targeted with ETFs, it seems providers are increasingly turning to sectors in these markets to give investors more options for their portfolios. As with any emerging market fund, follow the trend lines in order to protect yourself. (How to follow trends).

For more stories about new ETFs, visit our New ETF category.

Vanguard

Vanguard Group Inc. is already the largest U.S. stock and bond mutual fund manager, and now the firm has set out to conquer the ETF industry, one sector at a time. Charles Stein for Bloomberg reports that Vanguard is the third-largest sponsor of ETFs, and has captured more than 30% of the money flowing into the business this year by charging an average fee of 0.15%; the industry average is 0.54%.

Vanguard now has $77 billion in ETFs, after inflows of $17.8 billion this year. The firm’s share of the market rose to 11%, up from 8.5% at the end of last year. (How to choose ETFs).

Their strategy of charging the lowest in fees is garnering the interest of many investors who are educated on the possibility that fees can cut into principal and earnings. (What else is important when selecting ETFs?).

But Vanguard has something else interesting at play: the firm’s founder, John Bogle, has been vocal in his criticism of ETFs. His chief complaint is that they encourage short-term trading. Bogle stepped down as Vanguard’s CEO in 1996.

For more stories about ETFs, visit our ETF 101 category. Among Vanguard’s lineup of funds include:

• Vanguard Emerging Markets ETF (NYSEArca: VWO): up 68.6% year-to-date
  

• Vanguard Europe Pacific ETF (NYSEArca: VEA): up 25.3% year-to-date

• Vanguard REIT Index ETF (NYSEArca: VNQ): up 15.4% year-to-date

Many executive pension fund managers worldwide are pouring assets into emerging markets in an effort to gain more bang for the buck. As the recession has wound down, emerging markets generally have fared better than developed ones, making them an appealing destination for cash, reports Thoa Hua for Pensions & Investments.

Recently, long-held assumptions about emerging markets have been challenged, including their level of volatility, liquidity limits and their overall ability to survive an economic crisis. (Why ETFs are ideal as emerging market plays).

To the surprise of many, it was the emerging markets that recovered before the developed world even begin to dream of a turnaround. Gary Gordon for ETF Expert notes that while it’s true that emerging markets were among the first to fall, they were also the first to recover. (Six things you’re missing by not being global).

In the long-term, many expect that emerging markets will only continue to become major contributors to the health of the global economy. They already account for one-third of the global GDP and 10% of the world’s market capitalization. To ignore them would be to lead a gigantic hole in your portfolio.

Although emerging markets are recovering handsomely and are well ahead of developed market ETFs, it’s still wise to proceed with caution. Protect yourself by using an exit strategy, which you can read about here.

For more stories about emerging markets, visit our emerging markets category.

• iShares MSCI Emerging Markets (NYSEArca: EEM): up 54.1% year-to-date

• Vanguard Emerging Markets (NYSEArca:VWO): up 61% year-to-date

For full disclosure, Tom Lydon’s clients own shares of EEM.

Although the pace may eventually slow down, Barron’s reports that emerging markets still have room left to grow in the long haul. And for the time being, they may be the place to hide out as developed markets still work toward normalcy. In the near-term, growth rates in developed nations are expected to be lackluster, and much less robust than those in the developing world’s. (What you’re missing when you’re not globally invested).

Countries that are resource rich and developing are stockpiling cash and shoring up their balance sheets for a strong recovery and a growth spurt unlike any seen before. Earnings and  economic activity have been revived. Morgan Stanley feels that earnings in emerging markets have bottomed in the third quarter and they’re now set to climb again. (Why frontier markets could be even bigger).

For more stores about emerging markets, visit our emerging markets category.

There are a variety of ways to play emerging markets. There are broad funds, such as iShares MSCI Emerging Markets (NYSEArca: EEM), Vanguard Emerging Markets (NYSEArca: VWO) and iShares MSCI EAFE Index (NYSEArca: EFA).

There are funds that focus on regions, such as Claymore/BNY Mellon BRIC (NYSEArca: EEB) and BLDRSAsia 50 ADR Index (Nasdaq: ADRA).

Finally, there are single-country funds, such as iShares MSCI Brazil (NYSEArca: EWZ) and Market Vectors Vietnam (NYSEArca: VNM).

Keep in mind that the narrower you get in your exposure to emerging and frontier markets, the higher your risk will be. Be sure to have an entry and exit strategy before you invest. (How to follow trends).

In the emerging markets ETF industry, the iShares MSCI Emerging Markets Index (NYSEArca: EEM) is losing ground to its low-cost competitor, the Vanguard Emerging Markets Stock (NYSEArca: VWO), writes Ian Salisbury for The Wall Street Journal. The expense ratio for EEM is 0.72%, whereas VWO is 0.27%.

Since the start of the year, a new infusion of money found its way into emerging market ETFs and Vanguard’s fund took in $5 billion compared to the more established Barclays iShares‘ $2 billion.

Barclays currently has no plans to reduce expense fees and says short-term investors will favor EEM because of the ETF’s lower trading costs. (Find out what to look for when choosing an ETF here).

The iShares ETF has kept fees high because developing country stocks are difficult to come by and the ETF’s hefty trading volume attracts large investors.

• iShares MSCI Emerging Markets Index (NYSEArca: EEM): up 60.8% year-to-date

• Vanguard Emerging Markets Stock ETF (NYSEArca: VWO): up 69% year-to-date

For more information on emerging markets, visit our emerging market category.

For full disclosure, Tom Lydon’s clients own shares of VWO and EEM.

Max Chen contributed to this article.

The impressive growth of emerging market countries is confirming the theory of decoupling, which holds that such countries are beginning forge a path of their own without the aid of developed nations, writes Michael Brush for MSN Money.

A few more stats that support the case:

• Cristina Panait at investment firm Payden & Rygel has calculated that developing economies made up 45% of world GDP last year, compared to 37% in 2000.
• Emerging countries are beginning to consume more with their newfound wealth – around 35% of $1.3 trillion in U.S. exports went to emerging market consumers in 2008.
• These purchases could help “nudge” the United States back to growth of 3% to 3.5% a year sooner than most people anticipate, says one economist.
• Increases in the emerging markets may also appreciate emerging currencies. Healthy economic growth in emerging markets will attract foreign investment, which would drive up demand for their currencies.
• Emerging market companies are beginning to rise onto the worldwide stage with global name brands in the technology sector, auto industry, banking and telecommunication services.
• The International Monetary Fund estimates emerging markets will grow 4.7% next year.

• iShares MSCI Emerging Markets Index (EEM): up 45.4% year-to-date

• Vanguard Emerging Markets Stock ETF (VWO): up 51.4% year-to-date

For more information on emerging market countries, visit our emerging markets category.

For full disclosure, Tom Lydon’s clients own shares of EEM.

Max Chen contributed to this article.

Many ETFs have been trending higher in recent weeks, says Gary Gordon for ETF Expert. The pattern of the funds recovering indicates that while investors are more willing to take on risk than they were a year ago, there is still some fear lingering.

The stimulus package is proving to lead to increasing business access to credit and government-stimulated GDP.

Some of the ETFs that have been on the move by varying degrees in the last month or so include:

• iShares Investment Grade Bond (LQD)
• iShares High Yield Junk (JNK)
• SPDR International Treasury Bond (BWX)
• JP Morgan Emerging Market Bond (EMB)
• iShares S&P Preferred Index (PFF)
• iShares Lehman Treasury 20-Year Treasury Bond (TLT)
• Vanguard Total U.S. Market (VTI)
• Vanguard Developed Europe Pacific (VEA)
• Vanguard MSCI Emerging Markets (VWO)

TLT’s presence on the list is evidence that there’s still some worry hanging around. Treasury debt prices rose on Wednesday, in fact, as investors wondered whether the recovery had staying power, reports  John Parry for Reuters. Investors also don’t seem to be up for taking on much risk via commodities, Gordon points out.

There will still be market pullbacks and corrections as well as profit-taking, but pick your spots. There are several areas that are in uptrends – you just have to look for them. At ETF Trends, we use the 200-day-moving-average to spot market trends and patterns.

For more stories about trend following, visit our trend following category.

During last year’s market declines, large-cap emerging market indexes closely matched the small-cap emerging market indexes. This year, emerging market small-cap ETFs are performing in excess of large-caps, writes Kyle Waller for IndexUniverse. What it means:

• Positive Signal? The bulls say this is a sign of a strong bottom-up progress in developing countries, coupled with the ability of smaller companies to adapt as conditions change.

• Why An ETF? Using an ETF as your means for getting into small-caps in emerging markets can be beneficial, as many small companies in these markets can be difficult to research. Instead, the provider can do the legwork for you.

• More Risk? Small-cap emerging market companies are riskier than traditional emerging market investments, which usually translates into higher price volatility and liquidity issues. It’s also important to be mindful of any political instability and currency exchange rates. Have a strategy to help protect yourself.

• On the Plus Side…The rewards for investing would be the potential for above-average returns. These ETFs also can help lower a portfolio’s correlation to stocks focused on developed countries.

SPDR S&P Emerging Markets Small Cap (EWX) is more concentrated in Taiwan and China. WisdomTree Emerging Mkts Small Cap Div (DGS) is concentrated in Taiwan but it also has large holdings in South Africa, Korea and Israel. Vanguard Emerging Markets Stock ETF (VWO) has more exposure in China and Brazil.

• SPDR S&P Emerging Markets Small Cap (EWX): up 66.5% year-to-date; consumer goods is 18.7%, materials 18.2%, energy 2.7%, utilities 3.6%, health care 2.8%, consumer services 8.0%, business services 6.1%, financial 21.1%, software 1.8%, hardware 10.6%, media 2.3%, telecom 4.1%

• WisdomTree Emerging Mkts Small Cap Div (DGS): up 55.9% year-to-date; consumer goods is 17.6%, materials 18.1%, energy 3.0%, utilities 5.9%, health care 0.9%, consumer services 8.6%, business services 10.2%, financial 16.8%, software 1.2% hardware 13.0% media 1.2%, telecom 3.5%

• Vanguard Emerging Markets Stock ETF (VWO): up 51.6% year-to-date; consumer goods is 9.1%, materials 17.9%, energy 13.3%, utilities 5.1%, health care 2.9%, consumer services 3.1%, business services 1.7%, financial 22.4%, software 1.2%, hardware 9.0%, media 1.0%, telecom 13.3%

• iShares MSCI Emerging Markets Index (EEM): up 46% year-to-date; software is 1.7%, materials 19.1%, energy 12.4%, utilities 6.0%, hardware 12.4%, media 1.1%, telecom 12.1%, health care 2.0%, consumer services 2.6%, business services 1.9%, financial 22.2%, consumer goods 3.5%

For more information on emerging markets, visit our emerging markets category.

For full disclosure, Tom Lydon’s clients own shares of VWO.

Max Chen contributed to this article.

Emerging market ETFs have captured almost a third of assets in funds focused on those countries and ETFs have experienced some staggering percentage growth, writes Murray Coleman for IndexUniverse. Research has indicated that while index mutual funds are also on the rise, active mutual funds in the short-term are on the decline or have plateaued.

There is a growing shift away from active management toward passive ETFs in the emerging markets, remarks Alexander Redman For IndexUniverse. Since the beginning of 2008, the $365 billion invested globally in emerging market equities has gone from being 16% in ETFs to 30%.

Redman argues that retail investors have become disgruntled with high fees for actively managed portfolios on top of heavy losses over the past year, which have made people turn to emerging market ETFs as a way to invest in a cheap and liquid source of beta without having to study up on individual stocks.

It is noted that a majority of emerging market ETFs are aligned along regional or country geographies instead of sectors. Active funds tend to invest by country rather than by sectors and could increase intra-country investment correlations.

• iShares MSCI Emerging Markets Index (EEM): up 41.8% year-to-date

• Vanguard Emerging Markets Stock ETF (VWO): up 47.9% year-to-date

For more information on emerging markets, visit our emerging markets category.

For full disclosure, some of Tom Lydon’s clients own shares of VWO.

Max Chen contributed to this article.

Emerging market ETFs are gaining investors’ interest, even in these economic climes. Naturally, providers have responded to the demand with increasingly specialized funds. Where once we saw ETFs focused solely on regions or specific countries, now there are funds focused on emerging market sectors and asset classes. It’s a trend largely only seen in developed markets until now.

The growing appeal of ETFs by both retail and institutional investors can be thanked, in part, by the liquidity they provide. This liquidity is especially key in emerging markets, reports Joan R. Magee for The Wall Street Journal.

There are ways to tackle the increasing number of choices:

• Consider your risk tolerance. The more broad the fund, the more spread out your risk is going to be. Choosing an all-encompassing Asia ETF is different than selecting a Taiwan fund.
• Consider your current allocation. If you’re already heavy in oil, for example, do you really need both a Russia ETF and an emerging markets energy fund?
• Emerging markets can be volatile – protect yourself and mitigate the risk with a strategy.
• Whatever you do, consider the role of emerging markets in your portfolio. Experts now feel that international exposure is a key component of any portfolio.

• iShares MSCI Emerging Markets Index (EEM): up 34.1% year-to-date

• Vanguard Emerging Markets (VWO): up 39.1% year-to-date

• SPDR S&P Emerging Markets (GMM): up 35.2% year-to-date

For more stories about emerging markets, visit our emerging markets category.