Emerging Markets should really be a part of any truly diversified portfolio. As an investment class it provides excellent diversification benefits as well as some structural positives such as high population growth and increasing wealth. However investing in Emerging Markets comes with access difficulties and higher risk. Using ETF's to invest can solve the access issues but it won't shield you from the risk. The recent underperformance of this class has left valuations looking attractive at present. The underperformance has been due to two main factors, China issues and increasing interest rates in the US. This article will have a quick look at the options available on the ASX to invest in Emerging Markets.
There are 6 ETF's providing exposure to Emerging Markets equity;
EMKT - Van Eck Emerging Markets Equity
VGE - Vanguard FTSE Emerging Markets Shares
WEMG - SPDR S&P Emerging Markets Fund
EMMG - Betashares, Martin Currie Emerging Markets Fund
IEM - iShares MSCI Emerging Markets ETF
FEMX - Fidelity Emerging Markets Fund
All of these options provide broad exposure to Emerging Markets.
The Betashares EMMG and Fidelity FEMX are 'managed' funds rather than index based and attract a higher management expense. EMKT is a factor based fund with holdings selected by factors such as value, low size, momentum and quality.
All ETF's have China as their major investment destination. EMKT holds 38.2% in China down to EMMG holds only 28%.
In the past 12 months the Van Eck EMKT has been the standout performer but over 5 years all these funds are very close to each other.
The choice of ETF in this case might come down to factors such as expenses, VGE the lowest at 0.48%, the diversification of the portfolio, VGE again on top with more than 5000 companies in the portfolio (vs only 288 for EMKT) and PE ratio where the factor fund EMKT has a significant advantage on the latest numbers.
Log in to Accument.com.au and access the app to see all the details on these funds and much more information.