After years of being a popular investment strategy, interest in emerging markets seems to have hit a bottom.
Many of the leading emerging markets have failed to perform. Brazil has been besieged with problems. Poland elected a somewhat anti-business President. Turkey just had a very visible coup d'etat that may have just been a ruse designed by President Erdogan to further solidify power.
But emerging markets have always had similar problems. It’s part of the transition from developing to developed.
Investors looking to take advantage of the downturn through ETFs have a couple of options. The first is the iShares MSCI Emerging Markets IDX ETF (TSX:XEM). This ETF charges a somewhat high management fee of 0.82%, but gives investors exposure to many different improving economies.
The biggest country exposure is China, at 26% of assets. That’s followed by South Korea (15%), Taiwan (12%), India (8%), and Brazil (7%). It has exposure to a total of 16 different countries.
Vanguard Canada has a similar offering, the Vanguard FTSE Emerging Markets All Cap IDX (TSX:VEE). It has a much lower management fee of of 0.23%.
China is again the biggest exposure, with 27.5% of the fund’s assets invested there. That’s followed by Taiwan (15.5%), India (12%), Brazil (9%) and South Africa (also 9%).
Performance of the two funds is virtually identical over the past five years, and both offer reasonable liquidity for the average investor. Thus, it’s hard to pick a winner. They both look like solid choices for an investor looking to invest in developing markets.
