Low-volatility emerging market exchange traded funds have caught investors’ attention as a way to get exposure to this notoriously capricious asset class.
Specific country allocation is important when considering these funds, since the ETF portfolios can look different depending on the individual strategy of the low-volatility fund.
“The low or minimum volatility ETFs seem to be a winning combination to investors as many are understandably queasy after all the market turmoil the last several years. Typically the conventional emerging market funds can be more volatile and these products seek to minimize some of the drama with their respective security selection methodologies,” John Peter of DividendETFList.com wrote for Seeking Alpha. [ETF Spotlight: Low-Volatility, Emerging Market Dividends]
One of the most important areas to mind with low-volatility emerging market ETFs is the country allocation. This can impact the performance of an ETF. Furthermore, what a fund manager classifies as “emerging” may vary from one to another. Other factors that impact performance are currency fluctuations and geopolitical risk. [Best Emerging Market ETFs]
The EGShares Low Volatility Emerging Markets ETF (NYSEArca: HILO) has just 30 holdings and has an expense ratio of 0.85%. The yield is much higher as expected, chugging in at around 5.2%. The assets under management are $87 million. The top three countries are South Africa, Turkey and China.