Additionally, as the standoff continues and uncertainty remains, Russian equities could continue to drag on the emerging markets group. EEM, which tries to replicate the MSCI Emerging Markets Index, includes a 5.1% weight toward Russia. On the other hand, Russia exposure is limited in EEMV and only makes up 1.7% of EELV.
However, when investing in the low-volatility emerging market ETFs, investors will have to take into account currency risks – the funds do not hedge against a depreciating foreign currencies, so falling emerging market currencies or a strengthening U.S. dollar can have a negative effect on returns.
“Emerging-markets equities and currencies can see steep declines when global market volatility spikes,” Oey warned.
For more information on low-vol funds, visit our low -volatility category.
Max Chen contributed to this article.
