Eric Dutram: Emerging Global Advisors, under its EGShares brand name, is the only ETF provider to be entirely focused on emerging market products. Over the past few years, the company has utilized this strategy to become one of the biggest players in the developing nation ETF space,with several popular funds like the Low Volatility Emerging Markets Dividend ETF (NYSEARCA:HILO) and the Emerging Markets Consumer Titans ETF (NYSEARCA:ECON).
The firm has also released a number of more specialized products targeting specific sectors in various nations to differing degrees of success. However, as of late it appears as though the company is once again targeting the broad emerging market space with a few of its funds (also see EGShares Reveals Plans for 11 Emerging Market ETFs).
Recently, investors saw the Beyond BRICs ETF (NYSEARCA:BBRC) hit the market, while the latest launch saw the company debut the Emerging Markets Core ETF (NYSEARCA:EMCR). This new fund brings the total number of emerging market ETFs up to 22 for the upstart firm, easily cementing the company as one of the leaders in the increasingly important market segment (read EGShares Launches Two Targeted Emerging Market ETFs).
This is especially true because many investors are still heavily concentrated in just a handful of emerging market ETFs, forgoing exposure to more specialized segments that could be the true beneficiaries of immense growth in the near term. Furthermore, many of these more popular products are heavily concentrated in a few choice nations or sectors, suggesting a wide net isn’t being cast by most investors in the space.
The new EMCR looks to alleviate some of these concerns and give investors broad emerging market exposure across a variety of sectors. This looks to be done by tracking the S&P Emerging Markets Core Index, a benchmark that holds just over 100 securities and is equally-weighted.
It should also be noted that the product will charge a relatively low 70 basis points a year in fees while the dividend looks to come in around the 2.2% mark on an annual basis. Additionally, the fund has a nice breakdown across nations with China, South Africa, and India hitting the 15% cap and then Brazil and Russia accounting for, respectively, 10% and 8.8% of the fund (read Three Emerging Market ETFs to Limit BRIC Exposure).
Beyond nations, the product is also a bit more tilted towards consumer stocks instead of the heavy financial and oil concentration that many other emerging market ETFs have. This product puts close to 34% in the broad consumer space, a modest 16% in financials, and then 10% in industrials to round out the top four.
This approach clearly reduces the industry concentration that afflicts many emerging market funds that are currently on the market, while still giving the product a focus on large cap stocks. This is further helped by the index’s stipulation which looks to limit the largest industry groups to six companies in order to ensure that a few firms do not dominate the broader index.
With this unique approach, EMCR could stave off the intense competition in the broader emerging market space. Additionally, the fund lacks a great deal of competition, due in large part to its specialized focus (read Three Overlooked Emerging Market ETFs).
After all, there are only a handful of other equal weight products out there in the emerging market space including FEM and EWEM. However, these are slightly more expensive than the EGShares new product and they both have very different methodologies, suggesting that there could be room for another competition in the quickly growing but increasingly competitive emerging market ETF world.
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