Guggenheim tweaks its exposure to emerging markets at a challenging time for these countries.
The Guggenheim BRIC ETF (EEB | B-41) today is officially swapping out the BNY Mellon BRIC Select ADR Index for the BNY Mellon BRIC Select DR Index, a modified version of the former, to give the fund more exposure to Russia and India, while cutting its allocation to Brazil.
The $249.2 million EEB, a first-to-market ETF that launched in September 2006, was never a true BRIC fund as its name suggested it was, in that it lacked a substantial allocation to Russia. The change this fall to the BNY Mellon BRIC Select DR Index addresses that shortcoming.
EEB will also, for the first time, be able to own Hong Kong-listed China H-shares. The fund’s China exposure has featured global depositary receipts exclusively since its inception.
“Transitioning to the BNY Mellon BRIC Select DR Index will provide more representative exposure to the BRIC super region,” said William Belden, managing director at Guggenheim Investments, in a press release.
“We see this as an opportunity to track an index where the capitalization weights of the four countries—Brazil, Russia, India and China—are more appropriately weighted,” Belden continued.
The index change to EEB comes at a time when emerging markets asset prices have come under pressure for various reasons, ranging from the slowdown in China to middle-class unrest in places like Turkey and Brazil to the prospect of normalizing borrowing rates in the U.S.
With emerging markets out of favor and investors focusing on the U.S., it may be a perfect time for fund sponsors to make changes to funds they feel need tweaking.
“A lot is changing in the emerging markets,” said Dennis Hudachek, an ETF analyst at IndexUniverse, suggesting that perhaps now is as good a time as any to update strategies on funds that may be a bit out of step with the realities of modern emerging markets investing.