Launched in 2015, the $1.5 billion Goldman Sachs ActiveBeta Emerging Markets Equity fund (GEM) is one of the newer members of the group. The fund has an expense ratio of 0.50%. Its universe is the MSCI Emerging Markets Index and it focuses on four styles in the companies it seeks out—value, momentum, quality and low volatility. The firm says these qualities are associated with companies’ superior long-term performance.
WisdomTree also has a suite of factor ETFs, including the $1.3 billion Emerging Markets SmallCap Dividend Fund (DGS), which has an expense ratio of 0.63%, and the $2 billion Emerging Markets High Dividend Fund (DEM) whose expense ratio is 0.63%. Like other ETFs in the family, these follow a fundamentally weighted index of high-dividend-yielding stocks. The small-cap fund recently had a distribution yield of 4.5%, while the DEM fund’s yield was 3.9%.
Single country funds can serve as a complement to more diversified emerging markets holdings. This group includes the iShares MSCI India fund (INDA), the iShares MSCI China fund, the VanEck Vectors Russia fund (RSX) and the WisdomTree India Earnings fund (EPI). Because these tend to be even more volatile than diversified funds in this category, buying on dips is a good strategy here.
Even with more diversified emerging country funds, the markets can move so swiftly and dramatically that keeping an eye on valuations and avoiding froth is critical. The major emerging market ETFs around in 2008 lost more than half their value in less than six months. That kind of nosedive is not something anyone other than short sellers would like to repeat.