As investors become more concerned with a second wave of coronavirus cases, risk assets like emerging markets (EM) may fall to the wayside, which gives value hunters an option to pick up some potential gainers on the cheap. However, rather than perform all the due diligence themselves, exchange-traded fund (ETF) investors can opt for a cost-effective fund like the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM).
Sure, investors can pore over balance sheets and other fundamental indicators, but GEM does all of that built in to the fund using performance factors like value, momentum, quality, and volatility. The latter certainly speaks to the current level of market fluctuations experienced as a result of the coronavirus pandemic.
As such, by bringing in other factors like value, investors can get exposure to holdings that can sustain profitability in an uncertain environment. Furthermore, adding other factors like quality and momentum, investors get exposure to companies with strong fundamentals and the ability to sustain upside market movements or mute the effects of a downturn.
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. As of July 1, the fund tilts heavily towards financials and technology—the latter being a strong mainstay in today’s economy dominated by social distancing and lockdown measures.
In terms of actual holdings, GEM has big names overseas like Alibaba and Tencent Holdings. Other familiar names include Samsung Electronics—there’s an obvious title towards the Asia excluding Japan—a 75% allocation as of July 1.
Performance, Diversification and Cost-Effectiveness
All in all, the fund offers:
- Outperformance potential: Each ActiveBeta® ETF follows a performance-seeking methodology that aims to acquire stocks based on four well-established attributes of performance: good value, strong momentum, high quality and low volatility.
- Portfolio diversification: ActiveBeta® ETFs are one more option for investors to diversify their portfolios with equity exposure focusing on four distinct performance attributes
- Cost-effectiveness: ActiveBeta® ETFs are among the most competitively priced ETFs on the market. For example, the cost of our ActiveBeta® Emerging Markets Equity ETF is 45 basis points, compared to the industry average for EM smart beta ETFs of 52 basis points.
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