In addition to dividend-focused products, Global X has been pushing heavily into the emerging market space. These quickly growing countries have been overlooked by many investors, but thanks to some more favorable trading lately, could be making a comeback.
Global X has largely gone off the beaten path in its quest to offer emerging market options to investors, focusing on regions that haven’t been available to many U.S. investors. Its latest products in this vein targeted countries like Nigeria (NGE) or Mongolia (AZIA), while the newest addition to their lineup—the Next Emerging & Frontier ETF: EMFM—seeks to continue the trend.
EMFM in Focus
This new fund from Global X looks to follow the Solactive Next Emerging & Frontier Index, giving investors exposure to a variety of companies from around the developing world. The product looks to charge investors 58 basis points a year in fees, making it a bit cheaper than some of the other frontier market funds out there (see Why Frontier Markets are Still Attractive).
The appeal of this fund looks to be its focus on smaller developing markets that have been largely overlooked by investors, and still absent from many portfolios. In fact, the fund looks to exclude securities from the BRIC nations, in addition to ones from South Korea and Taiwan as well.
A focus that goes to other nations beyond these six giants could produce higher growth rates, and tap into the next round of emerging market all-stars. Plus, since many nations are absent—or are in small quantities—in other emerging market funds, there are also diversification benefits from this approach.
Portfolio in Focus
The fund looks to hold about 200 securities in total, though no security looks to account for more than 2% of the total, though there is a market cap weighting mechanism. Asian stocks dominate at roughly 37.6% of assets, while Latin America (23.3%), Eastern Europe (19.4%), and Africa (13.7%), round out the rest and leave just a little bit for Middle East stocks at 6% of the fund.
In terms of sectors, financials take the top spot at 19.9% of assets, followed by materials (17.3%) and telecoms (13.5%). Energy and industrials also receive double digit weights, while tech and health care aren’t well represented at just 3% combined (read Frontier Markets: A Better Choice for ETF Investors?).
Investors should also note that the index can include ADRs and GDRs, in addition to common stocks. Furthermore, companies must either be based in these emerging nations, or derive at least 50% of their revenues from these markets.