Global X Funds, the New York-based sponsor of exchange-traded funds known for its dividend-focused products, has launched a fund that gives investors exposure to an exciting crop of emerging and frontier markets.
The Global X Next Emerging & Frontier ETF (EMFM) gives a new spin to EM investing as it includes equities from 35 countries exhibiting high growth potential and favorable demographical trends. The fund comprises of 200 holdings and focuses on regions that haven’t been available to most US retail investors, and specifically excludes stocks from the BRICS, South Korea and Taiwan.
Global X believes the countries included in EMFM have a demographic advantage over the BRIC nations with an average age of 28 against 33 for BRIC. It believes these economies will experience longer periods of high growth rates, similar to what the BRIC nations experienced over the past 15 years.
Also, growth in traditional emerging economies has started to slow down and has become too closely correlated with developed markets.
EMFM tracks the Solactive Next Emerging and Frontier Index and includes stocks from Asia (37.6 percent), Latin America (23.3 percent), Eastern Europe (19.4 percent), Africa (13.7 percent) and the Middle East (6 percent). With 10.5 percent allocation, Malaysia is the benchmark’s largest single country constituent.
Countries included in the index account for 24 percent of world population, but just contribute 12 percent of global GDP and 8 percent of equity market capitalization.
In addition to common stocks, the index can include ADRs and GDRs of companies that are principally traded in or have their main business operations in these markets or that generate at least 50 percent of their revenues from these markets.
In terms of sectors, financials occupy the top spot with 19.9 percent assets, followed by materials (17.3 percent), telecommunication services (13.5 percent), energy (13.1 percent) and industrials (11 percent). Consumer staples, consumer discretionary, utilities, health care and information technology all receive single digit weights.
The fund has an annual expense ratio of 0.58 percent.
Disclosure: No holdings
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