“Our research has shown that sector and country allocations in an equity portfolio are the main drivers of portfolio performance,” according to a Legg Mason research note. “Those who want to invest across equity markets may want to focus on diversification and limit exposure to countries and sectors that behave similarly.”
As opposed to the market cap-weighted indexing methodology, EDBI’s factor-based methodology only weights China at 13.6% of the portfolio, followed by Malaysia 9.8%, India 9.0%, Turkey 7.7%, South Afria 6.7%, South Korea 6.3%, Brazil 5.3%, Mexico 5.0% and Chile 5.0%.
EDBI’s sector weights are also less top heavy, with financial sat 15.8%, consumer staples 12.6%, materials 12.1%, consumer discretionary 12.1%, consumer discretionary 12.1%, telecom 11.7%, industrials 9.6%, energy 9.4%, utilities 8.4%, health car 3.8% and tech 3.6%.
Year-to-date, EDBI has increased 13.0% while the MSCI Emerging Markets Index gained about 9.5%.
Legg Mason Emerging Markets Diversified Core ETF