There are myriad ways for investors to gain emerging markets exposure with exchange traded funds with the most common being diversified, multi-country funds that weigh components by market value.
That usually means ample exposure to China, South Korea, Taiwan and Brazil along with a hefty allocation to the financial services sector. In terms of holdings, common placeholders in many diversified emerging markets ETFs include Taiwan Semiconductor, and if the ETF values South Korea as an emerging market, Samsung.
These funds are also, in many cases, exposed to massive state-controlled enterprises, usually hailing from the financial services, energy and materials sector. [Brazil ETFs Almost Attractive]
A new ETF, the EGShares Blue Chip ETF (NYSEArca: BCHP) eschews the common ETF approach to emerging markets exposure. Rather than hold companies based in emerging markets, BCHP leverages developed market firms that derive significant portions of their revenue from the developing world.
“Some of the companies tracked by the big emerging markets ETFs are giant multinationals that get large portions of their revenue from developed markets. This ETF could lead a new wave of ‘economic exposure’ ETFs that aren’t interested in where a company is domiciled but rather in where its revenue comes from,” reports Eric Balchunas for Bloomberg.
While BCHP’s approach may be unique, a deeper look at the new ETF’s construction turns up a familiar methodology along with plenty of familiar constituents.