Get Back into Emerging Markets Using the “GEM” ETF

It was only a couple of months ago when the coronavirus pandemic soured the taste for emerging markets (EM) as investors feared the possibility that EM countries couldn’t bounce back from a downturn versus their developed markets brethren. Now, as global economies look to reopen, emerging markets are still a good opportunity to capture diversification and growth as a value-tilted option, but the right strategy that highlights due diligence is a must—enter the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM).

GEM seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Goldman Sachs ActiveBeta® Emerging Markets Equity Index. The fund invests at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index, in depositary receipts representing securities included in its underlying index and in underlying stocks in respect of depositary receipts included in its underlying index.

The index is designed to deliver exposure to equity securities of emerging market issuers. In order to obtain the highest quality equity exposure, GEM aims to acquire stocks based on four well-established attributes of performance: good value, strong momentum, high quality, and low volatility.

In a capital market environment where value is often pitted against growth in a battle of factors, GEM uses both in addition to other factors that can filter out the best equities that can capture upside, but at the same time, mute the effects of a downturn. Rest assured, GEM gives investors the diversification they seek with emerging markets, but only the best that EM equities have to offer using their strategy.

As of June 17, its top 10 holdings include the majority of allocations to popular names like Alibaba and Tencent Holdings—two strongholds in China’s business community:

  1. Alibaba Group Holding Ltd: 6.2 percent
  2. Tencent Holdings Ltd: 5.3 percent
  3. Taiwan Semiconductor Manufacturing Co Ltd: 4.2 percent
  4. Samsung Electronics Co Ltd: 3.5 percent
  5. China Construction Bank Corp: 1.2 percent
  6. Ping An Insurance Group Co of China Ltd: 1.0 percent
  7. Naspers Ltd: 0.8 percent
  8. Meituan Dianping: 0.8 percent
  9. Reliance Industries Ltd: 0.8 percent
  10. Samsung Electronics Co Ltd: 0.8 percent

Cost is an ever-growing debate in the ETF world as more investors look to not only obtain the fund performance they desire but to also do so at a low cost. As such, ActiveBeta® ETFs are among the most competitively priced ETFs on the market—as an example, the cost of the ActiveBeta® Emerging Markets Equity ETF is 45 basis points, compared to the industry average for EM smart beta ETFs of 52 basis points.

For more information on GEM, click here.

Additionally, for more market trends, visit ETF Trends.