Emerging market exchange traded funds provide investors with access to the up-and-coming economies of the world, but most ETFs have a hefty weight to BRIC – Brazil, Russia, India, China – economies. Instead, investors can take a look at so-called beyond BRIC offerings that offer a more focused exposure to developing countries.
For instance, the EGShares Beyond BRICs ETF (NYSEArca: BBRC), which is up 7.8% year-to-date and broke to a new 52-week high Thursday, tries to reflect the performance of the FTSE Beyond BRICs Index. BBRC has a 0.58% expense ratio.
Due to its index methodology, BBRC includes exposure to emerging and frontier markets, excluding BRIC economies. Specifically, the ETF’s top country allocations include Mexico 16.1%, South Africa 15.9%, Malaysia 12.0%, Qatar 11.6%, Indonesia 8.6%, Nigeria 7.9%, Thailand 6.8%, Poland 4.9%, Turkey 3.9% and Chile 3.8%.
Just a couple of months after it debuted last year, BBRC transitioned to the FTSE Beyond BRICs Index in October, allowing the ETF to carry up to 25% frontier markets exposure. [Nigerian Opportunity for These ETFs]
“Beyond BRIC countries are becoming a more important force in the global economy, with a rising share of world equity market capitalization and a higher labor force growth rate than the BRICs and developed markets,” according to Emerging Global Advisors.
In contrast, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), which follows the benchmark MSCI Emerging Markets Index, includes China 17.4%, Brazil 11.0%, India 7.0% and Russia 5.4%.
Additionally, investors can take a look at the SPDR MSCI EM Beyond BRIC ETF (NYSEArca: EMBB). EMBB follow the MSCI EM Beyond BRIC Index, which is comprised of stocks from the MSCI Emerging Markets Index, excluding components from the MSCI BRIC Index. EMBB has a 0.55% expense ratio. [Leave the BRIC, Take This ETF]
Consequently, EMBB country weights include South Africa 15.4%, Taiwan 15.4%, South Korea 14.5%, Mexico 12.4%, Malaysia 9.4%, Indonesia 6.6%, Thailand 5.2%, Turkey 4.3%, Poland 3.9% and Chile 3.7%.
Since EMBB tracks an MSCI index, the State Street offering includes large exposure to Taiwan and South Korea. In contrast, the FTSE index-based BBRC does not rank South Korea as an emerging market and excludes Taiwan entirely. Additionally, EMBB only includes emerging market countries.
For more information on developing economies, visit our emerging markets category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of EEM.