While U.S. small-caps and the major exchange traded funds holding those stocks have recently come under pressure, ETFs tracking international small-caps have stood firm.
That is particularly true of emerging markets small-cap ETFs. Just look at the SPDR S&P Emerging Markets SmallCap ETF (NYSEArca: EWX). Having celebrated its sixth anniversary earlier this month, EWX is one of the elder statesman among emerging markets small-cap ETFs, but the $654.1 million ETF is not showing signs of slowing down.
Over the past 90 days, EWX is up 7.4% compared to an average loss of 2.5% for the iShares Russell 2000 ETF (NYSEArca: IWM) and the Vanguard Small-Cap ETF (NYSEArca: VB). [Global Small-Cap ETFs Top U.S. Rivals]
Although the combination of emerging markets stocks and small-caps under the roof of one ETF could lead investors to think EWX is an overly volatile ETF, the fund alleviates some of that concern with a 29.4% allocation to Taiwan, one of the least volatile emerging markets. [Time for Taiwan]
Speaking of volatility, EWX has been slightly less volatile than IWM and VB over select time frames. EWX has also been less volatile than the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) over the past three years while slightly outperforming the two largest emerging markets ETFs, according to ETF Replay data.
EWX offers another advantage to investors: Solid exposure to Indian small-caps. The ETF devotes 13.4% of its weight to India, making it EWX’s third-largest country weight. By comparison, the MSCI Emerging Markets Index has a weight of about 7% to India and the country is merely EEM’s sixth-largest geographic allocation.
The allocation to Indian small-caps cannot be understated as an important driver of EWX’s recent bullishness. Over the past three months, the Market Vectors India Small-Cap Index ETF (NYSEArca: SCIF), EGShares India Small Cap Fund (NYSEArca: SCIN) and the iShares MSCI India Small-Cap ETF (NYSEArca: SMIN) have produced an average gain of 54%. [Post-Election Opportunity for India Small-Cap ETFs]