iShares, the issuer behind the ultra-popular MSCI Emerging Markets Index Fund (EEM), is planning to expand its emerging market product offerings, filing for approval on two sector-specific ETFs, the MSCI Emerging Markets Financial Sector Index Fund and the MSCI Emerging Markets Material Sector Index Fund. Historically, emerging markets ETFs have offered broad market exposure, inclusive of numerous sectors across emerging market economies. The proposed funds would be the first from iShares to target specific sectors of emerging markets.
The financial ETF will track the MSCI Emerging Markets Financial Sector Index, a benchmark composed of approximately 166 banks, insurance companies, and real estate firms in 22 emerging market countries. The benchmark underlying the materials ETF, the MSCI Emerging Markets Materials Sector Index, is slightly more narrow, including 108 companies in 18 countries.
iShares’ financial ETF will compete with the EGS Dow Jones Emerging Markets Financial Titans Index Fund (EFN), while the materials ETF will compete with an upcoming ETF also from Emerging Global Advisors, the EGS Dow Jones Emerging Markets Basic Materials Titans Index Fund (EBM).
Emerging markets ETFs have been very popular in recent months as investors continue to regain risk appetite. EEM and the Vanguard Emerging Markets ETF (VWO) saw cash inflows of $1.8 billion and $2.2 billion, respectively, in October. But there’s a lot more to emerging market ETFs than these two giants, with numerous country-specific ETFs and now sector-specific funds for investors to consider. Don Dion gave an excellent breakdown of the potential uses for all of these emerging markets ETFs, as well as some tips to consider when screening for potential investments. ETFdb Pro members can learn more from our Emerging Markets Equities ETFdb Category Report (if you’re not a Pro member, you can sign up for a free trial or read more here).
In recent months, however, options for investors looking to gain exposure to specific industries within emerging markets have expanded significantly. In addition to EFN, Emerging Global Advisors has launched two additional sector-specific emerging markets ETFs, including an energy fund (EEO) and a metals and mining fund (EMT), and has filed for approval on several more. Global X, in addition to its Nordic and Colombia ETFs, has filed for approval on a number of sector-specific ETFs focusing exclusively on Chinese markets.
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Disclosure: No positions at time of writing.