Like Emerging Markets? Hate Volatility? Meet the CEZ ETF

As emerging markets equities are experiencing a rebirth, investors have avenues for reducing some of the volatility associated with this asset class, including the VictoryShares Emerging Markets Volatility Weighted ETF (NasdaqGM: CEZ).

CEZ follows the performance of the Nasdaq Victory Emerging Market 500 Volatility Weighted Index, with a focus on securities weighted by their risk rather than traditional market capitalization weighting.

Another differentiator is the way CEZ identifies EM companies that have been proven performers. VictoryShares requires selected companies to have four quarters of net positive earnings. From there, CEZ screens for the 500 largest EM securities according to market capitalization, but then applies an innovative weighting methodology, allocating to those companies inversely based on their historical risk (volatility over the past 180 trading days).

The Emerging Markets Outlook

Covid-19 put the hammer down on emerging markets assets, just as the group was getting 2020 started on the right foot.

Emerging markets equities are now turning higher, and many market participants are bullish on the prospects for the asset class to start 2021. Ongoing positive sentiment in the emerging market as an asset class has attracted greater attention among investors. Moreover, given the extended low-rate environment, many income seekers are turning to alternative sources of yield.

Market watchers say after 10 years of lagging behind the United States, emerging markets may finally be ready for the prime time, as valuations and a rebounding global economy continue to look positive.

Using volatility — rather than concentrating on a specific market sector or utilizing a cap weighting strategy, which is the practice of using market price and the outstanding shares to determine the percentage weighting of a company for inclusion in an index — helps Victory Capital provide investors with solutions that can weather different market environments.

Good news: embracing CEZ doesn’t mean sacrificing returns. In fact, the VictoryShares ETF is beating the MSCI Emerging Markets Index on a year-to-date basis.

Chinese and Indian stocks combine for almost 37% of the CEZ portfolio.

CEZ 3 Year Performance

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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