The emerging market space was hard hit by global worries, largely from the concerns stemming from the end of the Fed’s QE program, the lingering Eurozone crisis (which can impact exports), sluggish domestic demand and strong U.S. dollar.
Being commodity centric, these nations are susceptible to any downtrend in the global economy. Further, high inflation and interest rates in the emerging markets, especially compared to their developed market counterparts, are creating pressure.
This situation has resulted in capital flight from the top emerging market funds like iShares MSCI Emerging Markets ETF (NYSEARCA:EEM) and Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO).
However, thanks to a lack of Fed tapering and a rebound in many key markets (such as Europe), some funds that are gaining traction. Many investors have flocked to these funds with confidence growing on various emerging nations.
These products provide huge diversification benefits among nations as well as companies. As such, the downturn in any of these nations would be offset by the positive economy of the other nation (read: 3 Emerging Market ETFs Still Going Strong).
Based on this, we have highlighted three large cap funds that could make for interesting picks in the tail end of the year. These are poised for a strong run heading into 2014, and especially so if emerging market sentiment continues to head in the right direction.
iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV)
The fund provides exposure to low volatility stocks in the global emerging market space by tracking the MSCI Emerging Markets Minimum Volatility Index. It is by far the largest and most popular ETF with about $2.9 billion in AUM while volumes are pretty good. The fund charges 25 bps in fees and expenses.
With 220 holdings, the product allocates a small portion in each of the securities (less than 1.60%) that could keep the portfolio balanced among the various companies and prevent heavy concentration. From a sector look, financials dominate the fund, making up for 27.1% share alone in the basket. Taiwan (17.40%), China (13.3%) and South Korea (10.5%) are the top countries in terms of exposure.
Though the fund lost about 0.9% year-to-date, EEMV seems a decent choice for investors seeking to ride out the frequent bouts of volatility in the markets, and it is up about 4% in the past three months.
The fund currently has a Zacks ETF Rank of 3 or ‘hold’ rating.
iShares Core MSCI Emerging Markets ETF (IEMG)
This fund tracks the MSCI Emerging Markets Investable Market Index. It is cheap, charging 0.18% in expenses, and has amassed $2.7 billion in AUM, while volume is also quite solid.