Published January 29, 2013
Keeping with a theme that started in earnest last year, investors have continued to put cash to work in low volatility emerging markets ETFs in 2013. Inflows to "low vol" products have continued even as diversified emerging markets ETFs have struggled to start the new year.
For example, the iShares MSCI Emerging Markets Index Fund (EEM) was off three percent heading into the start of trading Tuesday.
Still, those developing markets funds that skimp on volatility have again been outpacing their traditional peers, another trend that became evident last year.
Year-to-date, the iShares MSCI Emerging Markets Minimum Volatility Index Fund (EEMV) is off about 1.1 percent, but that is still good enough to best the Vanguard FTSE Emerging Markets ETF (VWO) and EEM, the two largest emerging markets ETFs by assets.
Impressive is how rapidly EEMV has accumulated assets. In late December 2012, it was noted that it was merely a matter of time before EEMV joined the $1 billion in AUM club. On December 21, the fund had $817 million in assets and that was up from $600 just a few months prior.
As of January 28, EEMV had $1.02 billion in assets, according to iShares data. Translation: EEMV has grown its AUM total by 22.3 percent in the span of just five weeks.
The iShares offering is not the only fund residing in the low volatility emerging markets space. Nor is it the only one that is proving to be a prodigious gather of assets. It took the PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV) just about a year of trading to cross the much ballyhooed $100 million AUM mark.
For much of 2012, EELV flew under the radar relative to EEMV, but investors started to put cash to work in the former late in the year. By December 12, 2012, EELV had $86.5 million in AUM. The total is now $100 million, according to PowerShares data. Asset growth of 15.6 percent in six weeks is impressive for any ETF, period.
EELV was off about 1.2 percent this year at the start of trading Tuesday and the reasons for that slack performance are easy to spot. The ETF allocates 33.5 percent of its weight to South Africa and Malaysia. South African equities have hampered by labor unrest while Malaysian stocks have tumbled as investors and voters there appear skittish ahead of this year's general election.
Malaysia and South Africa represent just over 15 percent of EEMV's weight. That ETF is dominated by Taiwan and China, which combine for over 29 percent of the fund's weight.
Notable is the fact that neither ETF is heavy on emerging European issues. EELV features no exposure to that region while Poland, Russia and the Czech Republic combine for less than three percent of EEMV's weight.
For more on diversified emerging markets ETFs, click here.
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