2 Emerging Market Niche ETFs

With a large amount of money flowing into emerging market ETFs in January I felt it was appropriate to highlight the sector for our followers.

The most popular emerging markets ETF is the iShares MSCI Emerging Markets Index ETF ($EEM). This ETF has been around for over a decade and has often been the go-to ETF for investors looking to gain exposure to the emerging markets. The one problem I have with $EEM is that it concentrates almost solely the large-cap emerging market stocks and therefore does not give true exposure to the sector.

I would like to focus on 2 Niche Emerging Market ETFs that could help diversify a portfolio and boost gains.

EG Shares Emerging Markets High Income Low Beta ETF ($HILO) - The ETF invests in emerging market stocks that will offer lower volatility along with a higher dividend yield than the MSCI Index ($EEM). The ETF pays a 5.2% dividend yield, well above that of 1.7% offered by $EEM. The top countries are South Africa, Turkey, and China. Financials and consumer goods are the top sectors. In the last 18 months the ETF is up 6% versus a 6% gain for $EEM, but when the dividend is taken into consideration $HILO has clearly outperformed.

EG Shares Emerging Markets Consumer ETF ($ECON) -This niche ETF concentrates on companies that sell to the consumer within the emerging market countries. The sectors include food and beverage, retailers, media, and autos. This ETF has big upside in our opinion because of the potential for the middle class to continue outperforming the overall emerging markets sector. In the last 18 months the ETF is up 23% - blowing the doors off the return of $EEM.

Chart of $ECON vs. $EEM over the last 12 months.

** We owns shares of $HILO and $ECON for clients of Penn Financial Group.