10 Best Emerging Market ETFs Via Quant-Based Evaluations

For more portfolio diversification, investors can include more emerging markets ETFs as part of their dosage to protect from future volatility. The EM space has had its fair share of struggles in years past, but for investors who are still hesitant when it comes to international market exposure, now is the time with a possible trade deal between the United States and China looming as the primary trigger event.

While the majority of investors might have been driven away by the red prices in emerging markets during much of 2018, Lydon believes they should be looked at as substantial markdowns, especially if trade negotiations between the U.S. and China result into something materially positive. From a fundamental standpoint, low price-to-earnings ratios in emerging markets ETFs have made them prime value plays as capital inflows continue.

While the EM space can give investors exposure to certain pockets of the global market they couldn’t access in the past, it also gives investors a dose of the second largest economy via China. Given its sheer size, it’s difficult to fathom that China is still considered an emerging market.

China will no doubt be a major beneficiary if and when a permanent trade deal materializes and index providers like MSCI have been quick to act as barriers to entry for the once restrictive markets in the second largest economy begin to soften. MSCI Inc. announced it would increase the weight of China A shares in the MSCI Indexes by increasing the inclusion factor from 5% to 20% in three steps.

How do investors know which EM equities provide the best performers? Quant-based strategies can help investors suss out which EM opportunities can provide the best value.

The following table includes ETFdb Ratings for all ETFs in the Emerging Markets Equities. The ETFdb ratings are transparent, quant-based scores designed to assess the relative merits of potential investments. ETFs are ranked on up to six metrics, as well as an Overall Rating.

ETF Total Assets YTD Overall Rating Liquidity Rating Expenses Rating Returns Rating Volatility Rating Dividend Rating Concentration Rating
Vanguard FTSE Emerging Markets ETF (VWO) $65,309,568.22 14.07% A A A B+ B B+ A+
iShares Core MSCI Emerging Markets ETF (IEMG) $60,724,565.98 12.22% A A A B+ B+ B A
iShares MSCI Emerging Markets ETF (EEM) $35,540,014.56 12.57% A- A+ B- B B B A
Schwab Emerging Markets Equity ETF (SCHE) $5,977,828.02 13.39% A A A+ B+ B+ B A
Schwab Fundamental Emerging Markets Large Company Index ETF (FNDE) $2,415,859.97 10.26% A- A- A A- B- C+ A-
WisdomTree Emerging Markets Equity Income Fund (DEM) $2,233,646.15 10.82% A- A B B B- A A-
Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM) $1,813,721.31 11.27% A A- A N/A A- C A-
WisdomTree Emerging Markets SmallCap Divdend Fund (DGS) $1,467,744.81 13.82% A A- B A- A- B+ A
Invesco FTSE RAFI Emerging Markets ETF (PXH) $1,341,539.14 10.28% B+ A B A C A- C
First Trust Emerging Markets AlphaDEX Fund (FEM) $697,711.03 8.91% A- A- A- B B- B+ A-


Reemergence of emerging markets

2019 has thus far seen the reemergence of emerging markets (EM), but while investors are sifting through the plethora of opportunities the EM space has to offer, investors can play to the strength of the EM space over developed markets.

For investors looking for the continued upside in emerging market assets, whether driven by a weakening USD or continued developments around trade, the Direxion MSCI Emerging Over Developed Markets ETF (NYSEArca: RWED) offers them the ability to benefit not only from emerging markets potentially performing well, but from emerging markets outperforming developed markets.

Conversely, if investors believe that resolutions to the big issues impacting sentiment today are in motion, the Direxion MSCI Developed Over Emerging Markets ETF (NYSEArca: RWDE) provides a means to not only see developed markets perform well, but a way to access a convergence/catch-up in performance of DM relative to EM, a spread that has clearly widened over the past 6 months.

For more relative market trends, visit our Relative Value Channel.