Emerging Global Advisors, the New York-based issuer specializing in emerging market exchange traded funds, has unveiled a self-indexed fund that offers investors exposure to a basket of developed market companies with quality, substantial and growing revenue from emerging markets.
The EGShares Blue Chip ETF (BCHP) tracks the EGAI Developed Markets Blue Chip EM Access Index, an equally-weighted 30 stock index that measures the performance of multinationals domiciled in the US, Europe and other developed markets, buts get a large share of their revenues from emerging markets.
Since the US Fed’s announcement of tapering last year, emerging market ETFs saw massive capital outflows, as investors assumed a rate-hike announcement from the central bank will follow soon, which, in turn, would push up yields. Unfortunately, the yield-rise forecasts didn’t materialize as the US Fed repeatedly asserted slack in the economy, indicating a rate hike is nowhere on the horizon.
Emerging markets, which collectively account for 40 percent of global GDP, started to attract capital again, diminishing their currency volatility and restoring capital-account normalcy.
There is a growing realization that emerging markets’ share in the global GDP is only going to increase with the passage of time. China is already expected to overtake the United States as the world’s largest economy as early as this year on purchasing power parity terms (PPP). BCHP could be ideal for investors who want exposure to emerging markets without the occasional heartburns that is typically associated with EM equities. According to EGShares, emerging market subsidiaries have delivered double the revenue and earnings growth of their multinational parents.
The new fund is tilted heavily towards its top three sectors: Consumer Staples, Consumer Discretionary and Industrials, and they notch up about 57 percent of total fund allocation.
Country-wise, United States takes the top spot with 36.7 percent allocation, followed by the UK (13.3 percent) and Switzerland (10 percent). The top-10 holdings in the underlying index include familiar names such as Colgate Palmolive, Qualcomm, Diageo, Anheuser-Busch Inbev SA, miner Rio Tinto, Las Vegas Sands, Swatch Group and Yum! Brands.
The fund has an annual expense ratio of 0.60 percent.
Disclosure: No holdings