The Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging markets exchange traded funds by assets, are up an average of almost 16% this year, but that does not mean the rally in developing world equities is over.
Although emerging markets exchange traded funds are among this year’s most prolific asset gatherers in the U.S., some market observers argue that emerging markets equities are under-owned by big investors and that the asset class has more room to rally.
“In fact, some of the top performing stock markets this year have included Brazil’s Bovespa, which has risen nearly 14 percent year to date. Indonesia’s benchmark Jakarta composite, one of the outperformers for 2016, is also up nearly 7 percent,” reports CNBC.
Last week, Standard & Poor’s elevated Indonesia’s sovereign credit rating to investment-grade territory. Stocks in Southeast Asia’s largest economy have been solid this year, but are also lagging the MSCI Emerging Markets Index.
The Goldman Sachs ActiveBeta Emerging Markets Equity ETF (NYSEarca: GEM) is a smart beta option to consider for investors looking for diversified emerging markets exposure that is not cap-weighted.
GEM tries to reflect the performance of the Goldman Sachs ActiveBeta Emerging Markets Equity Index, which includes exposure to developing market stocks but selects components based on good value, strong momentum, high quality and low volatility.