Recent outflows aside, it is still fair to say low volatility
ETFs are popular. It is certainly accurate to say they are
The PowerShares S&P 500 Low Volatility Portfolio (NYSE:
) and the rival iShares MSCI USA Minimum Volatility ETF (NYSE:
) have about $6.5 billion in combined assets under
The emerging markets equivalents of those funds, the
PowerShares S&P Emerging Markets Low Volatility Portfolio
) and the iShares MSCI Emerging Markets Minimum Volatility
), are among a small number of emerging markets ETFs that have
been able to garner inflows even as developing world stocks have
Low Vol ETF Inflows Underscore Rally's Risk-Off
However, emerging markets ETFs
have been bouncing back
. If the recent rally proves durable, risk-tolerant investors may
want to eschew low volatility for high beta. The PowerShares
S&P Emerging Markets High Beta Portfolio (NYSE:
) is the ETF with which to do just that.
Simply put, EEHB is EELV's high beta cousin. EEHB tracks the
S&P BMI Emerging Markets High Beta Index, which is comprised
of " the 200 stocks from the S&P Emerging BMI Plus LargeMid
Cap Index with the highest sensitivity to market movements, or
beta, over the past 12 months,"
according to PowerShares
EEHB is in fact sensitive to market movements. That much is
evident by the ETF's 6.7 percent gain in the past five trading
sessions. That does not tell EEHB's entire story. With just $4.4
million in asssets under management, many investors
gloss over this fund
. That means over the past 90 days, they missed out on EEHB's
10.7 percent jump, a gain that was roughly twice as good as the
Vanguard FTSE Emerging Markets ETF (NYSE:
Over the past six months, both of those ETFs are down, but
EEHB, high beta and all, has slightly outperformed VWO.
One reason that is the case is, at the country level at least,
EEHB does not present investors with excessive risk. Brazil,
India and Indonesia fit the bill
as higher beta emerging markets
, but those countries combine for just 15 percent of EEHB's
China is the ETF's largest country weight at nearly 35
percent, but the three-year standard deviation on the iShares
China Large-Cap ETF is 23.4 percent, just 300 basis points higher
than the iShares MSCI Emerging Markets ETF (NYSE:
South Korea, typically viewed as a lower beta developing
market, is 24 percent of EEHB's weight. The three-year standard
deviation on the iShares MSCI South Korea Capped ETF (NYSE:
) is also about 300 basis points higher than EEM's.
Poland and Taiwan, the latter of which is another low beta
emerging market, combine for 7.7 percent of EEHB's weight and
that more than takes care of the India and Indonesia exposure. So
maybe EEHB is not too high beta after all.
Another thing EEHB is not is richly valued. With China, South
Korea and Russia combining for 62 percent of the ETF's weight,
EEHB is more than adequately allocated
to some of the cheapest emerging markets
For more on ETFs, click .
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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