Emerging Market ETFs: More Choices Than Ever | ETF Trends

Reflecting the rapidly growing popularity of emerging markets, iShares has filed for two new sector exchange traded funds (ETFs) focusing on the asset class.

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).