iShares, the world’s biggest the exchange-traded fund issuer, recently launched a new emerging market fund that focuses on the “beyond BRICS” theme and looks to tap the rapid growth in other emerging markets in Asia, Eastern Europe, Latin America and the Middle East.
The iShares MSCI Emerging Markets Horizon ETF (EMHZ) provides exposure to companies that could well be the next generation of emerging market growth stars.
The passively-managed EMHZ tracks the MSCI Emerging Markets Horizon Index, a gauge that considers the smallest quartile of countries from the broader MSCI Emerging Markets Index. That makes the new fund a subset of the highly successful $36 billion iShares MSCI Emerging Markets ETF (EEM).
Smaller fifteen countries such as Mexico (20.75 percent), Malaysia (15.78 percent), Indonesia (11.32 percent), Thailand (9.27 percent), Turkey (7.22 percent), Poland (6.65 percent) and Chile (6.1 percent) dominate the funds weightings while the BRICS countries and other highly advanced emerging markets of South Korea and Taiwan are excluded.
To be sure, many smaller EM economies are in an earlier stage of development than their larger peers and are likely to grow faster as they catch up. Also, the smaller EM economies are less tied to the global economy and exhibit lower correlation with each other, helping in lowering overall portfolio volatility.
EMHZ will compete with three other beyond BRICS ETFs including the $309 million EGShares Beyond BRICS ETF (BBRC), the $151 million Global X Next Emerging & Frontier ETF (EMFM) and the much smaller $3 million SPDR MSCI EM Beyond BRICS ETF (EMBB).
Also EMBB excludes the BRICS nations, but adds Taiwan and South Korea in the mix.
EMHZ’s top three holdings are Mexican telecom service provider America Movil (4.26 percent), consumer staples firm Fomento Economico Mexicano (2.05 percent) and Groupo Televisa (2.01 percent).
The fund has an annual expense ratio of 0.5 percent.
Disclosure: No holdings