With the MSCI Emerging Markets Index up more than 18% this year, investors are revisiting traditional emerging markets exchange traded funds. However, there are some compelling smart beta options to consider in the emerging markets space.
That includes the Schwab Fundamental Emerging Markets Large Company ETF (NYSEARCA:FNDE). FNDE is rapidly becoming one of the dominant names among smart beta emerging markets ETFs, an asset class usually dominated by plain vanilla cap-weighted funds.
FNDE tracks the Russell Fundamental Emerging Markets large Company Index, which selects, ranks and weights components based on fundamental factors like adjusted sales, retained operating cash flow and dividends plus buybacks.
“FNDE follows the fundamentally weighted Russell RAFI Emerging Markets Large Company Index, giving investors an alternative to traditional emerging markets ETFs. That also means a different look at the country level,” reports InvestorPlace. “For example, Brazil and Russia — two of the most volatile emerging markets — combine for almost 29% of FNDE’s weight compared to just 9.5% of the MSCI Emerging Markets Index. As a result, this ETF’s three-year standard deviation — a key volatility metric — is 430 basis points higher than what is found on the MSCI Emerging Markets Index.”