Many investors are wondering if it’s the right time to add exposure to emerging markets.
With ongoing market uncertainty and the possibility of a recession, investors may be wary to add exposure to riskier segments of the market. Emerging markets look like a ripe opportunity in the medium term; however, a deep recession could cause a tremendous sell off.
However, investors can navigate the risks by investing in an emerging markets strategy focused on providing downside protection. This allows investors to capitalize on the current low valuations while limiting the impacts of a potential recession.
“With persistent concerns about global economic prospects, advisors might want to look to maintain exposure to emerging markets but in a risk-conscious manner. It is important to remain well diversified geographically,” Todd Rosenbluth, head of research at VettaFi, said.
The Hartford Multifactor Emerging Markets ETF (ROAM) is a compelling strategy for accessing the attractive opportunities in emerging markets while mitigating some risk. The fund is unique in that it is underpinned by a multifactor strategy and targets lower volatility securities.
ROAM provides broad exposure to emerging market while also seeking to reduce volatility by 15% over a complete market cycle. Investors can use ROAM to access a volatile part of the market during a precarious part of the cycle.
How ROAM Differs from Category Peers
Notably, ROAM offers some of the best country and company diversification compared to the benchmark. The top 10 names comprise 23.3% of the MSCI Emerging Markets index by weight. Conversely, the top 10 holdings in ROAM make up just 11% of the fund by weight.
The fund provides less exposure to Chinese companies than many of its largest emerging markets ETF peers, including the Vanguard FTSE Emerging Markets ETF (VWO), the SPDR Portfolio Emerging Markets ETF (SPEM), the Schwab Emerging Markets Equity ETF (SCHE).
For more news, information, and analysis, visit the Multifactor Channel.
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This article was prepared as part of Hartford Funds paid sponsorship with VettaFi. Hartford Funds is not affiliated with VettaFi and was not involved in drafting this article. The opinions and forecasts expressed are solely those of VettaFi. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, a recommendation for any product or as investment advice.