ETF Talk: This Fund is the ‘Core’ of Emerging Market ETFs

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The iShares Core MSCI Emerging Markets ETF (IEMG) tracks a market-cap-weighted index of emerging market firms that cover 99% of market capitalization.

The fund seeks investment results that correspond to the price and yield performance of the MSCI Emerging Markets Investable Market Index. The underlying index is designed to measure large-, mid- and small-cap equity market performance in global emerging markets.

IEMG offers outstanding coverage of emerging markets in a low-priced and highly liquid package. As part of the line of “Core” exchange-traded funds (ETFs) from BlackRock, it offers very similar, but more comprehensive exposure than its sister fund EEM, another emerging markets ETF. IEMG includes smaller firms in its portfolio than EEM. IEMG is also far cheaper to hold than EEM shares. Since the fund’s 2012 launch, IEMG has attained a huge asset base and very deep liquidity.

The top IEMG sectors include financial services, technology, consumer cyclical, basic materials and energy. Among the fund’s top five holdings, 20.26% are in Tencent Holdings Ltd. (OTCMKTS: TCEHY), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE: TSM), Alibaba Group Holding Ltd. (NYSE: BABA), Samsung Electronics Co. Ltd. (OTCMKTS: SSNLF) and Naspers Limited Class N (OTCMKTS: NPSNY).

A regional review shows that IEMG’s top holdings are 74.11% in Asia, 11.36% in Latin America, 7.7% in the Middle East and Africa and 6.18% in Europe. Within Asia, the fund’s holdings are 21.91% in Hong Kong, 14.52% in South Korea, 12.19% in Taiwan and 9.61% in India.

The ETF currently has $49.95 billion in net assets and an average 0.02% spread, which is the difference between the bid and asking prices of a security. It has an expense ratio of 0.14%, so it is relatively cheap to hold in comparison to other exchange-traded funds.

To sum up, long-term investors who are looking for cheap, liquid and comprehensive exposure to emerging markets should consider this fund. It is also a good way to add international diversity to a portfolio. As always, investors should exercise their due diligence in deciding whether or not IEMG is a worthwhile investment, based on their personal needs.

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.

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