Investors looking for a less volatile approach to emerging markets exchange traded funds have some options to consider, including the iShares MSCI Emerging Markets Minimum Volatility ETF (Cboe: EEMV).
EEMV is a low-vol variant on the widely observed MSCI Emerging Market Index, is a solid option for investors looking for a volatility-reducing strategy that provides exposure to resurgent developing world stocks.
Investors considering EEMV should note that is fund, like other low volatility ETFs, focuses more more slow and stable companies, the low volatility strategy may underperform more growth-oriented stocks if the markets turn around.
The low-volatility factor investments work on the idea that they help cushion against market turns, limiting drawdowns that investors experience while providing upside potential. Consequently, the low- or min-vol strategies may produce better risk-adjusted returns over the long haul, which has been backed by extensive academic research.
“As a low volatility fund, EEMV has a smaller roster than traditional emerging markets ETFs with just under 270 stocks. The low volatility requirement also leads to some differences at the country level with China, Taiwan and South Korea combining for 52% of the fund’s weight,” reports InvestorPlace.
Likewise, EEMV also trims allocations to some of the more volatile emerging economies.