Through the evolution of the global economy and ETF marketspace, investors now have access to funds and companies that they may have never known about five years ago. Perhaps one of the largest leaps for international investors is the opening up of frontier and emerging markets, a high risk and reward strategy many have used while developed economies are regaining ground lost during the past recession [for ETF industry news, sign up for the free ETFdb Newsletter]. Interest in emerging markets has surged in recent years, and investors have embraced ETFs as the preferred means for accessing this asset class. Broad based ETFs are a great hold for investors looking to hedge their domestic portfolio, but many of these funds do not cast as wide a net as they claim [Download Free Report: How To Buy The Right ETF Every Time].
Emerging ETF Concentrations
For some investors, emerging markets exposure begins and ends with the four BRIC economies, Brazil, Russia, India and China. BRIC economies have proven to be a relatively safe and stable environment to invest in and are now flooded with foreign money influencing their returns. Many broad ETFs also offer sizable allocations to Taiwan and South Korea, which are no longer considered developing countries by most standards. [see 10 Questions About ETFs You've Been Too Afraid To Ask].
The chart below highlights the markets with the heaviest concentration of the broad based funds, based on the holdings of the five largest emerging market ETFs:
- Vanguard FTSE Emerging Markets ETF (VWO, A)
- iShares MSCI Emerging Markets Index Fund (EEM, B+)
- WisdomTree Emerging Markets High-Yielding Equity Fund (DEM, A-)
- iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV, A)
- WisdomTree Emerging Markets Small-Cap Dividend Fund (DGS, A)
Investors should always look into the locations their ETFs will focus on, as the geopolitical structure in each country could play a powerful role in firm returns.
Disclosure: No positions at time of writing.