The iShares Core MSCI Emerging Market ETF (IEMG) is an exchange-traded fund (ETF) that offers investors a chance to invest broadly in emerging markets as a whole rather than take the heightened risk of buying into a specific sector or country.
This broad-market approach involves IEMG tracking the investment results of an index that consists of all types of emerging market equities — large-, mid- and small-cap companies from around the globe that are all included in this fund. Founded in 2012, IEMG originally was viewed as a cost-effective alternative to the main emerging market benchmark ETF, the iShares MSCI Emerging Markets (EEM).
IEMG is only half the size of EEM, which has a giant market cap of $30 billion. Even so, IEMG has attracted a lot of attention in the four years since its inception and currently boasts year-to-date fund flows of almost $5 billion. One possible explanation for IEMG’s quick growth in funds under management could be its lower annual fees compared to its bigger rival. EEM charges an annual fee of 0.71%, whereas IEMG charges investors just 0.16% annually.
In terms of asset allocation, IEMG is invested almost entirely outside of the United States, with 72% of its portfolio in Asian stocks. Europe and South America account for a combined 27% of the remaining portfolio.
Despite the turbulence of global markets this year, IEMG has a respectable year-to-date return of 16.9%. This isn’t the strongest return among emerging markets thus far this year, but it still is impressive since emerging markets as a whole are more resistant to extreme price swings than individual sectors or countries. Investors in this fund can expect an expense ratio of 0.16% and a 2.1% dividend yield.
IEMG is fairly well diversified among different sectors, but its biggest investments are in technology, 23.18%) financial services, 21.56%, and consumer cyclical, 12.34%. The fund’s top holdings and their percentage of the portfolio’s assets include Tencent Holdings Ltd., 3.72%; Taiwan Semiconductor Manufacturing, 3.52%; Samsung Electronics, 3.46%; Alibaba Group Holding, 2.79%; and China Mobile, 1.85%.
So far, 2016 has been a year of ups and downs for many investors, but the emerging markets have been a bright spot in the financial landscape this year. If you like the idea of investing in emerging markets but aren’t thrilled to be putting your hard-earned capital at risk, consider a broad emerging market fund such as the iShares Core MSCI Emerging Market ETF (IEMG) as a possibility.
As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.