South Korea's Status
Over the past year, the equal-weighting strategy has lagged VWO
by more than 4 percentage points. Meanwhile the currency-hedged
portfolio of DBEM outperformed both strategies.
This may come as little consolation as DBEM's outperformance meant
a 10 percent loss, but when faced with the choice of losing less or
losing more, investors will always choose the former.
Last year removing the currency from the equation mitigated losses.
But making a single foreign-currency call, let alone making a
multiple-currency call in the case of a multi-country emerging
markets ETF, may be a bridge too far for most investors.
DBEM is a very straightforward way of altering the exposure offered
by VWO and EEM, but some investors may be choosing the theme with
the goal of getting exposure to the local currencies with the hope
they will rise against the dollar along with the fortunes of their
That makes VWO and EEM the right choice for investors unwilling to
try one of the many nuanced strategies floating around the industry
--whether they be low volatility, alpha seeking, or high beta.
After all, those funds may end up being the right choice moving
forward, but since so many of them are new, it's hard to compare
their historic performance against more established funds.
For investors that means market-cap weighted funds or bust -- and
add a side of South Korea.
I know my colleagues Dennis and Ana have recently blogged
thoughtfully about moving beyond VWO and EEM, but what I'm saying
is don't go fixing something that ain't broke.
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