Exposure to Emerging Markets & Munis Just Got Cheaper | ETF Trends

In 2019, investors are looking to play more defense against volatility, but at the same time, don’t want to do so at the expense of higher costs. Columbia Threadneedle Investments is realizing this trend and thus, lowered the expense ratios on a pair of funds that are necessary given the current market landscape.

First up is the  Columbia Multi-Sector Municipal Income ETF (NYSEArca: MUST), which seeks investment results that closely correspond to the performance of the Beta Advantage® Multi-Sector Municipal Bond Index. The index reflects a rules-based, multi-sector strategic beta approach to measuring the performance of the U.S. tax-exempt bond market.

With bond market mavens warning investors of headwinds in the fixed income space like the possibility of an inverted yield curve, rising rates and BBB debt sliding out of investment-grade, investors need to be keen on where to look for opportunities.

One area is within the municipal bond space, which may have gotten a boost following last November’s midterm elections. In particular, with respect to infrastructure spending—it’s one of the few things, if any, that Democrats and Republicans can agree on, but with the newly-divided Congress, this could fuel municipal bond ETFs.

Emerging Markets Sans the China Exposure

The recent trade spats between the U.S. and China may have investors wondering whether exposure to the second largest economy in the world is an optimal alternative. As such, there are funds like the Columbia EM Core ex-China ETF (XCEM) that provide emerging markets exposure without China.

XCEM seeks investment results that correspond to the price and yield performance of the Beta Thematic Emerging Markets ex-China Index. The index is designed to provide broad, core emerging markets equity exposure by measuring the stock performance of up to 700 emerging markets companies, excluding companies domiciled or exchange-listed in China or domiciled in Hong Kong.

Ongoing U.S.-China trade negotiations and geopolitical tensions put emerging markets in a state of unease in 2018, but investors can now look to their resurgence. Investors are increasingly emphasizing low cost a prime motivator for allocating capital in 2019, which makes ETFs like XCEM an attractive option.

The cheaper price will help provide the tailwinds emerging markets need for more growth in the future. With ETFs being the investment of choice for younger, nascent investors, that trend could continue in developing countries.

“We’re seeing young people in developing countries with entrepreneurial drive who are increasingly getting connected to the internet,” said Richard Sneller, head of emerging markets equity for Baillie Gifford. “It will be the most exciting growth stage in emerging markets over the next 10 years.”

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