With the government shutdown upon us, many have once again turned to overseas markets in search of uncorrelated, and potentially more attractive, returns. Even though the debt drama at home can surely spill overseas and inspire volatile trading around the globe, investors have been hesitant to jump into broad-based U.S. equity funds given their stellar run-ups YTD [see also 7 Emerging Market ETFs Crushing It In 2013].
Amid the tug-of-war on Wall Street and Capitol Hill, the WisdomTree Emerging Markets Growth Fund (EMCG), which launched last Thursday, is off to the races and garnering attention from investors looking to avoid all of the turmoil on the home front.
Under The Hood: EMCG
The WisdomTree Emerging Markets Consumer Growth Fund is linked to an index that uses a rules-based approach to focus on profitable companies that derive the majority of their revenues from emerging markets, all the while maintaining sensitivity to valuation. The universe of eligible companies spans across 17 emerging markets, including exposure to BRIC, Emerging Asia Pacific, Emerging Europe, as well as South America. The distinguishing factor here is that underlying companies must generate at least 60% of revenues from emerging markets [see Consumer Centric ETFdb Portfolio].
From a portfolio composition perspective, EMCG holds 250 companies. As the name suggests, this ETF is focused on consumer staple and discretionary stocks, although it also features a tilt towards smaller companies, which are more sensitive to local economies compared to their large-cap counterparts. EMCG also places a 5% cap on exposure to any individual holding as well as a 25% cap to any individual country, resulting in a deep, well-balanced portfolio [see also What's In Your South America ETF?].
Meet The Competition: ECON
EMCG joins the Emerging Markets Equities ETFdb Category, which is made up of more than 80 offerings with an average expense ratio of 0.65%; the new WisdomTree ETF falls in the middle of the cost spectrum as it charges 0.63% in annual fees. EMCG will be in direct competition with the EGShares Emerging Markets Consumer ETF (ECON, C), which charges a steeper 0.85% fee, but has managed to attract over $1.1 billion in assets under management since launching in late 2010. ECON offers a similar objective to EMCG, although its 30-stock portfolio may be a bit too shallow for those looking for more diversified exposure over the long-haul.
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Disclosure: No positions at time of writing.