After enduring turmoil in China and growth worries in Europe, emerging markets managed to get on its feet lately, as evidenced by the performance of different EM indices. That didn’t go unnoticed by Ohio-based Victory Capital, which recently launched a strategic beta fund focused on emerging markets.
The Victory CEMP Emerging Market Volatility Weighted Index ETF (CEZ) is the firm’s 11th launch and the first since Victory Capital acquired Compass EMP less than a year ago.
The new fund will track the performance of the CEMP Emerging Market 500 Volatility Index – an index developed in-house, and can be considered by investors looking for exposure in emerging markets through a low-risk alternative in order to diversify their portfolios.
CEZ’s underlying index starts off with the broader universe of emerging market stocks with positive earnings over the four most recent quarters. From the remaining securities, 500 companies with the largest market capitalization are selected, which are subsequently weighted based on their daily standard deviation/volatility of daily price changes over the past 6 months/180 trading days. The index is reconstituted semi-annually at every March and September.
The index uses a modified weighting methodology where stocks that jump around less are given more weight in the index. That should help the fund bounce less compared to other market-cap weighted peers. As of March 31, the index had 477 holdings with an average market capitalization of 11.6 billion and a P/E ratio of 19.6.
CEZ’s top 10 holding contribute just over five-percent of total assets under management, indicating negligible single-stock bias and zero concentration risk. As of March 31, the fund had highest exposure to China (13.4 percent), followed by Taiwan (12.2 percent) and India (10.9 percent). Egypt and Greece were at the bottom of the heap with 0.1 percent weights each.
The fund charges 0.5 percent annually.
Disclosure: No holdings