EGShares Launches Suite of Emerging Market Sector 'GEMS' ETFs

by: Eric Dutram

Emerging Global, the New York City-based ETF issuer best known for its funds that target consumers and infrastructure in developing nations, rolled out the latest addition to its product lineup Thursday with the debut of nine GEMS (Global Emerging Markets Sectors) funds. The lineup offers investors the chance to buy some of the largest companies in the world that are based in emerging markets in each of the ten market sectors, as well as a composite fund that represents all of the individual market segments. In total, the lineup consists of 11 ETFs; three are rebranded products and eight are brand new ETFs, nearly doubling the total number of funds that the company is offering.

All of the eleven funds will track Dow Jones Emerging Markets Titans indexes, which are benchmarks that include the 30 largest companies in each sector across various emerging nations. Investors should also note that these products exclude South Korea and Taiwan from their holdings, possibly giving a truer picture of the emerging landscape instead of heavy investments in these two quasi-developed nations. The focus on just the 30 largest companies also has important implications for investors as well. Although the products do not have the most diversity in their individual holdings, the funds’ focus on the largest securities ensures that the underlyings are extremely liquid and that they dominate their home markets, making the products ideal for those looking to tap into a sector rotation strategy in some of the world’s fastest growing nations.

The new ETFs are:

  • EGShares Composite GEMS ETF (NYSEARCA:AGEM)
  • EGShares Basic Materials GEMS ETF (NYSEARCA:LGEM)
  • EGShares Consumer Goods GEMS ETF (NYSEARCA:GGEM)
  • EGShares Consumer Services GEMS ETF (NYSEARCA:VGEM)
  • EGShares Financials GEMS ETF (NYSEARCA:FGEM)
  • EGShares Health Care GEMS ETF (NYSEARCA:HGEM)
  • EGShares Industrials GEMS ETF (NYSEARCA:IGEM-OLD)
  • EGShares Technology GEMS ETF (NYSEARCA:QGEM)
  • EGShares Utilities GEMS ETF (NYSEARCA:UGEM)

(note that OGEM, FGEM, and AGEM are replacing EEO, EFN, and EEG, respectively, in the EGShares lineup)

This new suite of products looks to capitalize on the growing trend of investors seeking greater granularity in their holdings, or those who are looking to tilt towards a particular sector of the emerging world. ”We believe (the) introduction of the EGShares GEMS ETFs fills the market need for a comprehensive set of solutions to allow investors to pursue sector exposures across emerging market countries,” said Marten S. Hoekstra, EGA’s CEO in a press release. “The GEMS can be an efficient way to access specific sectors. Their multi-country focus potentially offers considerable advantages, including diversity of economic, political, and currency exposure. And, as ETFs, they offer intraday liquidity and transparency of holdings, cost advantages, hedging and shorting opportunities, and allow for rapid implementation of portfolio strategy changes.”

Investors have already seen many issuers launch products that track different capitalization levels within a particular country’s market and have also seen some provide funds that focus on certain sectors in an emerging country as well. This move to bring the sector strategy to the global stage is only the next logical step in this trend and it could be met by large asset inflows by traders and investors alike. This is especially true given the popularity of sector funds in the U.S market; according to EGShares research, Sector and Theme investing accounts for close to $150 billion of U.S.-focused ETFs and close to 30% of all AUM in the space. This is in sharp contrast to the picture in emerging markets as sector and theme investing makes up less than $2 billion of the overall, or roughly 1.3% of all emerging market assets. If EGShares can find the same level of demand for its emerging market focused funds as others have seen in the U.S. space, this could become a very lucrative market for the upstart ETF issuer, allowing them to further expand their lineup of emerging market-focused funds.

Disclosure: No positions at time of writing.

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