Alternatively, the PowerShares ETF tracks the 200 least volatile stocks from teh S&P Emerging BMI Plus LargeMid Cap Index over the past 12 months. Holdings are rebalanced and reconstituted quarterly. EELV has a 0.29% expense ratio.
Along with a heavy 31.2% tilt toward financials, EELV includes 11.1% in consumer staples, 9.8% in telecom services, 9.6% in industrials, 9.3% in energy and 8.4% in materials. The fund also has a heavy weight in Taiwan at 26.4% of the portfolio, followed by South Korea 16.6%, Malaysia 15.1%, Brazil 11.2% and South Africa 8.0%. [The Other Side of Volatility ETFs]
While low-volatility ETFs help diminish potential troughs, the funds will also mute potential peaks. Consequently, these low-volatility strategies could underperform traditional market-cap emerging market indices in a bull rally.
The low-volatility emerging market ETFs also don’t hedge their currency exposure, so investors will be exposed to some currency risks.
For more information on the developing economies, visit our emerging markets category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of EEM.