When talk turns to the "emerging markets" exchange traded funds (ETFs), it often centers around a few economies in particular: Latin America, India and China. In the fourth quarter of 2007, however, there was one region that flourished: Eastern Europe.

Gary Gordon of ETF Expert says that the SPDR S&P Emerging Europe (GUR) ended the year just a few points off its 52-week high. Compare that with the performance of the iShares S&P Latin America 40 Index (ILF) and the iShares MSCI Pacific ex-Japan (EPP), both of which didn’t perform as nicely as they had in the previous three quarters.

So far this year, GUR is showing strong demand, thanks in part to a heavy weighting in energy. The fund is 50% allocated in that sector, and of that, 60% allocated in Russia (one of the BRICs, you’ll recall).

Is GUR truly an emerging market fund, though? The fund, overall, is 36.3% allocated in Russia, 13.1% in Poland, 12.1% in Turkey and 6.2% in Hungary. But before you nod your head "yes," consider that 27.1% of the fund is in the United Kingdom — decidedly not an emerging market. One can’t help but wonder if the fund is getting a little bit of its boost from the UK’s comparatively strong economy.

Another way to access Eastern Europe is through the iShares MSCI Austria Index (EWO). The fund is heavily weighted in the struggling financial sector, though, so keep that in mind as you consider the credit crisis that is not only affecting things on U.S. soil, but also abroad.


The opinions and forecasts expressed herein are solely those of Tom Lydon, 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.