ROAM is unique in that it is underpinned by a multifactor strategy and targets lower volatility securities. The ETF provides broad equity exposure to emerging markets while also seeking to reduce volatility by targeting a 15% volatility reduction over a complete market cycle.
Notably, ROAM is outpacing the popular iShares MSCI Emerging Markets ETF (EEM) by nearly 1,200 basis points over a one-year period.
Year to date as of August 31, ROAM is up 11.6% while EEM has climbed 4.2%. Notably, as emerging markets equities have declined in the past month, ROAM’s multifactor strategy has limited losses. ROAM has declined 5.2% compared to EEM’s 6.6% fall.
Diversification Gives ROAM an Edge
ROAM’s enhanced diversification is one the fund’s great strengths. The fund is more diversified than 95% of its emerging markets peers.
Looking at country diversification, one of the key differences between emerging markets funds ROAM and EEM is exposure to China. ROAM is less exposures to Chinese companies than 70% of its category peers.
According to ETF Database, China makes up the largest portion of EEM by weight (26.7%). Trailing China are Taiwan and India, each comprising around 15% of the portfolio by weight.
Conversely, ROAM’s largest country allocation is Taiwan (18.1%), followed by China (16.5%), India (15.6%), and South Korea (11.5%).
ROAM also limits company concentration. Holding 312 securities in total, the top 10 constituents in ROAM made up 10.9% of the fund by weight as of August 31. Meanwhile, EEM might look more diversified from afar, holding 1500 securities; however, this is deceiving as 35% of the fund by weight is in the top 10 names.
See more: “Why Value Stocks Are Still Well Positioned”
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