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Asset Class: Diversified Emerging Markets
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Correlation to U.S. Stock Market: 0.75
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Long-Term Performance: 5.45% CAGR
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S&P 500 Performance: 10.55% CAGR
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Back test timeframe: January 1995 – February 2024
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Oldest ETF back tested: iShares MSCI Emerging Markets ETF (EEM)
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Correlation to U.S. Stock Market: 0.76
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Long-Term Performance: 8.18% CAGR
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S&P 500 Performance: 10.76% CAGR
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Back test timeframe: May 2003 – March 2024
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Number of ETFs available in this asset class: 97
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Number of ETFs in this asset class that are 7-years old or older: 44
Diversified Emerging Markets vs S&P 500: January 1995 – February 2024
EEM vs SPY: May 2003 – March 2024
EEM vs SPY: April 11, 2003 – March 28, 2024
The Deep Value ETF Accumulator rankings for the 44 oldest Diversified Emerging Markets ETFs:
The 5 top ranked Diversified Emerging Markets ETFs head-to-head comparisons:
EYLD vs FEMS vs XCEM vs DGS vs EWX: August 2016 – March 2024
EYLD vs FEMS vs XCEM vs DGS vs EWX: July 14, 2016 – March 28, 2024
Stated objectives of 5 top ranked Diversified Emerging Markets ETFs:
EYLD – Cambria Emerging Shareholder Yield ETF focuses on companies in emerging market countries that are returning cash to shareholders through three attributes – dividends, buybacks, and net debt reduction. Differentiated sector allocation versus benchmark, MSCI Emerging Markets Index. Lower valuations than category average and MSCI Emerging Markets Index. Buybacks don’t trigger taxable events. Dividends and buybacks may help mitigate market drawdowns due to the income (dividends) they distribute, or the increase in operating earnings (buybacks) they generate.
FEMS – The First Trust Emerging Markets Small Cap AlphaDEX® Fund is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before the Fund’s fees and expenses, of an equity index called the Nasdaq AlphaDEX® Emerging Markets Small Cap Index. The Index is an “enhanced” index created and administered by Nasdaq, Inc. (“Nasdaq”) which employs the AlphaDEX® stock selection methodology to select stocks from the Nasdaq Emerging Markets Index that meet certain criteria. To construct the Index, Nasdaq ranks the eligible stocks on growth factors including 3-, 6- and 12- month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets. All stocks are ranked on the sum of ranks for the growth factors and, separately, all stocks are ranked on the sum of ranks for the value factors. A stock must have data for all growth and/or value factors to receive a rank for that style. Each stock receives the best style rank from the previous step as its selection score. The top 200 stocks based on the selection score determined in the previous step comprise the “selected stocks”. The selected stocks are divided into quintiles based on their rankings and the top ranked quintiles receive a higher weight within the index. The stocks are equally weighted within each quintile. Each stock is then tested in order of its selection score rank to check if the weight assigned to that stock is outside the country/sector weighting constraints, which are set at 15% above the benchmark weight. If the weight assigned to the stock, when added with the weight assigned to all higher ranking stocks in its country/sector, is greater than the constraint, then the stock’s weight is lowered to the highest rank in the next quintile. Stocks previously lower in rank then move up one rank. Such stocks in the lowest quintile that violate a constraint are removed from the portfolio and replaced by the highest scoring stock not originally selected, subject to country/sector constraints. This process continues until all the country/sector weightings meet the constraint. The Index is reconstituted and rebalanced semi-annually.
XCEM – Columbia EM Core ex-China ETF. Target emerging markets exposure with an ETF that diversifies across emerging markets, excluding China. Focuses on broad diversification. Captures predominantly large- and mid-cap companies in a diverse set of emerging markets. Offers emerging markets exposure, excluding China. Provides access to emerging markets while satisfying a distinct portfolio need for investors looking to control their exposure to China. Mitigates country-specific risk. Helps avoid some of the risk found in traditional emerging market benchmarks that comes from China’s significant weight in those indices. This fund seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Beta Thematic Emerging Markets ex-China Index. The Beta Thematic Emerging Markets ex-China Index is a market capitalization-weighted index designed to provide broad, core emerging markets equity exposure by measuring the stock performance of up to 700 emerging markets companies, excluding companies listed or domiciled in China or Hong Kong.
DGS – WisdomTree Emerging Markets SmallCap Dividend Fund seeks to track the investment results of dividend-paying small-cap companies in the emerging markets region. Gain exposure to small cap equity of emerging market dividend paying companies. Use to complement emerging market exposure accessing local economic growth and to satisfy demand for growth potential and income focus.
EWX – The SPDR® S&P® Emerging Markets Small Cap ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Emerging Markets Under USD2 Billion Index (the “Index”). Seeks to provide exposure to the small capitalization segment of emerging countries included in the S&P Global Broad Market Index. The selection universe includes emerging country equites within the S&P Global BMI with market capitalizations between $100 million and $2 billion at the time of inclusion. The S&P® Emerging Markets Under USD2 Billion Index is a float-adjusted market capitalization weighted index designed to represent the small capitalization segment of emerging countries included in the S&P Global BMI (Broad Market Index). The S&P Global BMI is a rules-based index that measures global stock market performance. The Index is reconstituted annually. To be included in the Index, a publicly listed company must have a total market capitalization between $100 million and $2 billion, and be located in a country that meets emerging markets status.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Previous Deep Value ETF Accumulator articles on Diversified Emerging Markets ETFs:
5 Best Diversified Emerging Markets ETFs to Buy and Hold: FEMS vs DGS vs EWX vs EEMS vs SPEM
Disclosure: We currently own shares of FEMS & EYLD and we intend to buy more shares in the future. I am not a professional investment advisor. Please perform your own due diligence or seek the advice of a Registered Investment Advisor before investing in any security mentioned in this article. This website contains affiliate links to Google AdSense.
