Smaller Emerging Markets ETF Hot New Trend

October 16, 2014

The firm joins a new era of emerging market investing with the launch of a new fund.

Today iShares launched a promising new emerging market ETF based on the “beyond BRICs” theme that’s gained momentum in 2014. I’m personally a fan of this new ETF and expect it to do well in the coming years.

Three years ago, I blogged on the need for a “smaller emerging markets” ETF. The new iShares MSCI Emerging Markets Horizon ETF (EMHZ) certainly looks like the answer to that blog.

EMHZ is a “smaller country” version of the $36 billion iShares MSCI Emerging Markets ETF (EEM | B-98) that holds the bottom 25 percent of EEM’s market cap by country. This means emerging markets (EMs) like Mexico, Malaysia, Indonesia and Thailand dominate the fund’s weighting, as opposed to the BRICS, Taiwan and South Korea.

Not The First Beyond BRICs ETF, But Different

To be clear, EMHZ is far from being the first beyond-BRICs ETF to launch. There are currently three other funds that target this up-and-coming theme.

The $309 million EGShares Beyond BRICs ETF (BBRC | D-36) was the first to launch back in August 2012. BBRC reaches beyond emerging markets to also include the frontier markets, as classified by FTSE.

The $151 million Global X Next Emerging & Frontier ETF (EMFM | C-37), launched in November 2013, is a similar “smaller emerging/larger frontier” markets ETF.

Meanwhile, the smallest of the bunch, the $3 million SPDR MSCI EM Beyond BRIC ETF (EMBB | F-59), is simply a version of EEM that excludes the four BRIC nations, but leaves South Korea and Taiwan in the mix.

EMHZ separates itself from BBRC and EMFM by limiting itself to strictly emerging markets, as defined by MSCI, but it goes beyond State Street’s EMBB by also stripping out South Korea, Taiwan and South Africa.


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