Published September 06, 2013
Some exchange traded funds focused on international markets have been sturdy performers as of late.
To the surprise of some investors, among this week's global ETF leaders are plenty of emerging markets ETFs, including downtrodden Brazil and India fare.
Related: Some EM ETFs Were Pretty Good In August.
The resurgence for international ETFs comes as investors were not shy about pulling money from exchange traded products last month. August was the worst month for ETF outflows since early 2010. However, the outflows data reveal an important point: That the bulk of the outflows, $13.8 billion to be precise, were attributable to the SPDR S&P 500 (SPY).
Said differently, investors pulled money from U.S. stocks. Some Europe ETFs actually saw inflows and while many emerging markets ETFs are struggling on the flows front, performance for some is starting to pick up. Those points could be signs the following are worth considering over the coming weeks.
EGShares Emerging Markets Consumer ETF (ECON) While investors have been pulling cash from all types of emerging markets ETFs this year, EGShares says it has raked in more than $400 million in new investments this year. ECON, the firm's largest ETF, is a big reason why.
Year-to-date, outflows from emerging markets funds are flirting with the $12 billion market, but inflows to ECON are flirting with $370 million. That could be a sign investors are still willing to bet on the growth of the emerging markets consumer.
Brazil and India ETFs have been pleasant surprises this week and investors that want to participate in that upside without the commitment of a single-country fund should consider ECON because the fund devotes over 27 percent of its combined weight to those two countries.
AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF (AADR) The AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF is actively managed fund with a highly concentrated lineup of just over 30 holdings mixed between developed and developing markets. Unheralded AADR has returned over seven percent year-to-date, but that does not tell the entire story. AADR can serve as a portfolio complement to funds benchmarked to the MSCI EAFE Index, which AADR has outpaced over the past three years.
Important to AADR's success is what the ETF does not include in its lineup. The ETF "generally passes on businesses in leveraged, slower-growing sectors such as energy, basic materials, utilities or financials, which dominate the international indices. Instead, the focus is on traditional growth sectors like technology, consumer discretionary / staples and healthcare," according to AdvisorShares.
No single holding can represent more than 10 percent of AADR's weight and sector exposure is capped at 45 percent while the fund limits total emerging markets exposure to 35 percent. Most of the fund's current developing world exposure goes to low beta Taiwan and Chinese technology names, which have been stellar performers this year.
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Disclosure: Author does not own any of the securities mentioned here.
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