After a strong performance subsequent to the financial crisis of 2008-2009, emerging markets are experiencing economic slowdown. This is primarily driven by a downturn in the commodity cycle since many emerging countries are export-driven with commodities playing a key role. After years of stable economic growth, China, the engine of emerging markets growth, is slowing down, as it is shifting from an investment-driven model to one based on consumption. This has played negatively on exchange-traded funds (ETFs) investing in equities from emerging markets; they shed millions of U.S. dollars in assets as investors reallocate their assets to safer funds.
iShares MSCI Emerging Markets ETF
The iShares MSCI Emerging Markets ETF (NYSEARCA: EEM) lost $1.7 billion year to date (YTD) as of March 4, 2016. The fund tracks the performance of the MSCI Emerging Markets Index, which provides exposure to equities from 23 emerging market countries. EEM is one of the most popular with high trading volumes among emerging market ETFs. It was created in April 2003 and has gathered $20.87 billion in assets under management (AUM). As of March 15, 2016, the ETF holds 845 stocks in its portfolio. Companies from China have the largest allocation of 23.97%, while firms from South Korea account for 15.5% of the fund's assets. Financial and technology stocks have 27.29% and 20.85% weights, respectively. EEM charges an expense ratio of 0.69% and has a three-star overall rating from Morningstar in the diversified emerging markets category.
Vanguard FTSE Emerging Markets ETF
The Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO) experienced YTD capital outflows of $1.2 billion as of March 4, 2016. The fund began operations in May 2005 and tracks the performance of the FTSE Emerging Markets All Cap China A Transition Index, which is composed of equities of companies from over 20 emerging market countries. VWO has $33.5 billion in AUM and 3,671 stocks in its portfolio that are concentrated in China with 27.3%, Taiwan with 15.9% and India with 12%. Financial services and technology equities have the largest weights of 24.63% and 18.63%, respectively. The fund has one of the lowest expense ratios of 0.15% and a three-star overall rating from Morningstar.
Global X Next Emerging & Frontier ETF
The Global X Next Emerging & Frontier ETF (NYSEARCA: EMFM) witnessed YTD capital outflows of $55.1 million as of March 4, 2016. It started investing in November 2013 and tracks the investment results of the Solactive Next Emerging & Frontier Index, which is composed of stocks of emerging market companies. Unlike traditional emerging market ETFs, this fund excludes Brazil, Russia, India, China and South Korea, as well as Taiwan. Instead, the ETF invests in countries that it considers having better growth prospects, such as Malaysia at 11.17%, Mexico at 10.77%, Thailand at 9.86% and South Africa at 9.75%. EMFM is relatively small and has $17.55 million in AUM. There are 202 stock holdings in the fund's portfolio concentrated on financial companies with 20.10% allocation and telecommunication services companies with 13.89% allocation. The fund charges an expense ratio of 0.58%.
EGShares Beyond BRICs ETF
The EGShares Beyond BRICs ETF (NYSEARCA: BBRC) lost $45.4 million in YTD capital outflows as of March 4, 2016. The fund started operations in August 2012 to track the performance of the FTSE Beyond BRICs Index, which is composed of 90 liquid firms from frontier and emerging markets, excluding Brazil, Russia, India, China and Taiwan, as well as Argentina. BBRC has $82.2 million in AUM and 91 holdings in its portfolio. The largest country holdings are concentrated in South Africa at 15.51%, Mexico at 14.77% and Malaysia at 12.01%. Its assets are heavily concentrated on financial firms with 41.50% allocation. Morningstar awarded the fund a two-star overall rating. BBRC charges an expense ratio of 0.58%.
First Trust Emerging Mrkts AlphaDEX ETF
The First Trust Emerging Mrkts AlphaDEX ETF (NASDAQ: FEM) experienced YTD capital outflows of $15.2 million as of March 4, 2016. The fund commenced operations in April 2011 to track the performance of the NASDAQ AlphaDEX Emerging Markets Index, which is composed of emerging market stocks. It uses a proprietary model to pick equities based on various relative value metrics and growth rates. FEM has $102.8 million in AUM and 151 holdings. China accounts for 23.29% of the fund's assets, while Taiwan and Russia have 13.88% and 12.46% weights, respectively. The fund's portfolio is concentrated on financial stocks with 20.95% allocation, energy stocks with 14.39% allocation and consumer discretionary equities with 13.11% allocation. It comes with an expense ratio of 0.80% and a two-star overall rating from Morningstar.