Beyond BRIC ETFs: Still Less Bad, but Key Differences

Few emerging markets exchange traded funds have escaped this year’s carnage, but some have been not nearly as dismal as others.

One of the unifying themes of the less bad club, particularly for diversified funds, is a distinct lack of acronym exposure. Namely BRIC or BIITS, the later comprised of Brazil, India, Indonesia, Turkey and South Africa.

A good way to dodge BRIC exposure is with a  Beyond BRICs ETF, a group consisting of the EGShares Beyond BRICs ETF (NYSEArca: BBRC), the older of the two funds, and the SPDR MSCI EM Beyond BRIC ETF (NYSEArca: EMBB). [Getting Selective With Emerging Markets ETFs]

Obviously, investors skirt the BRIC quartet with BBRC and EEMB, so from there, it becomes a matter of how much or how little ITS (Indonesia, Turkey and South Africa) one is willing to tolerate. This important because Indonesia ETFs have not been terrible this year, but the major South Africa and Turkey ETFs are sporting double-digit losses. [Help for Indonesia ETFs]

South Africa and Turkey combine for about 18% of EMBB’s weight and 19% of BRCC’s country lineup and both ETFs devote about 6% to Indonesia. Alright, so those are not big differences, but that does not mean BBRC and EMBB are bereft of traits that set them apart.

EMBB has the more conservative country mix as South Korea, Taiwan and Mexico combine for over 43% of the fund’s weight. That should be a positive in the current environment, but supposedly docile emerging markets, particularly South Korea, have betrayed investors this year. [No Refuge With These EM ETFs]

EMBB tracks an MSCI index. MSCI classifies South Korea as an emerging market. FTSE, the provider for BBRC’s underlying index, classifies South Korea as a developed market. Taiwan is also excluded from BBRC’s lineup.