As emerging markets ETFs with heavy exposure to Russian stocks continue to fall, investors should consider adding offerings that deliver limited exposure to Russia.
MSCI Inc. moved on Wednesday to remove Russian stocks from its emerging markets indexes, effective March 9, after the invasion of Ukraine shuttered the Moscow Exchange and left global investors unable to sell their holdings.
FTSE Russell also announced plans on Wednesday to remove Russian stocks from its indexes.
Given the tremendous growth potential of developing economies, many investors now make substantial allocations to this asset class; the FlexShares Morningstar Emerging Markets Factor Tilt Index ETF (TLTE) is one of several ETFs in the Emerging Markets Equities ETF Database category that can be used to tap into this corner of the market.
TLTE offers exposure to emerging market economies, an asset class that is at the core of many long-term, buy-and-hold portfolios, without being tilted toward Russia stocks — the fund only has 1.12% of assets in Russian securities, according to ETF Database.
The fund offers the largest exposure to China, Taiwan, South Korea, India, South Africa, and Brazil, among dozens of other emerging market economies.
The unique attribute of TLTE is its tilt towards emerging market small-cap and value companies. This feature is based on evidence suggesting that these types of securities may deliver excess returns over the long term; for investors interested in achieving broad, generally balanced exposure while implementing this tilt, this FlexShares ETF may represent an efficient way to make that strategic shift.
Many broad emerging market funds track market-weighted indexes, which may create concentrations in the largest stocks. This concentration can mean that portfolios may miss out on the historic growth opportunities sometimes found in emerging market small-cap and value stocks.
The fund, incepted in 2012, carries an expense ratio of 59 basis points.
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