Investors considering EEMV should note that this 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 rally.
China, Taiwan and South Korea combine for about 52% of EEMV’s geographic exposure. At the sector level, financials, technology and consumer staples combine for nearly 60%.
“From November 2011 through August 2017, the fund outpaced the MSCI Emerging Markets Index by 0.4 percentage points annualized, with 23% lower volatility,” said Morningstar. “This outperformance can be partially attributed to differences in sector exposures, specifically, underweightings in basic materials and energy and an overweighting in healthcare. Less exposure to countries such as Brazil and Russia also helped performance. The fund won’t always come out ahead: Investors should expect it to lag in strong market rallies.”
For more information on the low-vol strategy, visit our low-volatility category.