Fresh off Exchange wrapping up earlier this week, VettaFi head of research Todd Rosenbluth appeared on “Countdown With Claman” on Fox Business News to discuss the importance of doing your homework when picking out funds and how subtle differences among indexes could make similar funds perform in divergent fashions.
The exercise began with Rosenbluth introducing two emerging markets ETFs, the iShares Core MSCI Emerging Markets ETF (IEMG ) and the Vanguard FTSE Emerging Markets ETF (VWO ). On the tin, both of these funds appear to have similar exposures and fees, but Rosenbluth walked through the reasons why IEMG was outperforming VWO, noting that IEMG has companies like Samsung and strong performing South Korean exposures taking 12% of its holdings. Rosenbluth said, “VWO is also diversified across China and India, but it doesn’t have South Korean exposure because it’s considered a developed market according to its index partner.”
Emerging markets are getting a lot of attention as many experts anticipate they will perform well as the strong U.S. dollar regime fades. “The federal reserve is likely to be slowing its rate hikes,” Rosenbluth said, continuing, “a risk on environment is favorable to emerging markets and we’ve seen really strong interest at VettaFi to get exposure to emerging markets using ETFs.”
Clamon concurred that it’s easy to look at the top holdings in an emerging market fund and miss the nuance and difference between similar seeming funds.
Rosenbluth made the case that security and country-level diversification is critical. “We’re hearing from advisors at VettaFi that they are really interested in the EM space.”
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