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By The ETF Professor

Recent outflows aside, it is still fair to say low volatility ETFs are popular. It is certainly accurate to say they are large.

The PowerShares S&P 500 Low Volatility Portfolio (SPLV) and the rival iShares MSCI USA Minimum Volatility ETF (USMV) have about $6.5 billion in combined assets under management.

The emerging markets equivalents of those funds, the PowerShares S&P Emerging Markets Low Volatility Portfolio (EELV) and the iShares MSCI Emerging Markets Minimum Volatility Portfolio (EEMV), are among a small number of emerging markets ETFs that have been able to garner inflows even as developing world stocks have tumbled.

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 (EEHB) 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 assets 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 (VWO).

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 weight.

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 (EEM).

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 (EWY) 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.

Disclaimer: Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.

Source: Juiced Beta With This Emerging Markets ETF