The Invesco Developing Markets Fund Is A Top-Flight Fund

| About: Invesco Developing (GTDDX)

Summary

The Invesco Developing Markets Fund is the top ranked fund in Morningstar's Diversified Emerging Markets Category.

The fund has a sector weighting advantage in the financial services sector. The fund's financial services holdings have boosted the fund's performance.

The fund has favorable regional advantages in Latin America and Emerging Europe. They have a favorable deficit in Emerging Asia.

As of right now, the Invesco Developing Markets Fund (MUTF:GTDDX) is the #1 ranked fund in Morningstar's Diversified Emerging Markets.

The Invesco Developing Markets Fund Retirement has a 13.68% YTD Return. This performance greatly surpasses the YTD Return totals of the MSCI ACWI Ex USA NR USD (-3.94%) and the Diversified Emerging Markets category (2.29%).

When one looks at the market capitalization statistics of the Invesco Developing Markets Fund Retirement, one can notice that the fund has a portfolio weight deficit in terms of large-cap holdings, yet holds a sizable advantage in mid-cap holdings.

Size

% of Portfolio

Benchmark

Category Avg.

Giant

53.90

57.50

59.22

Large

16.79

31.46

21.34

Medium

23.98

10.65

15.56

Small

5.33

0.40

3.81

Micro

0.00

0.00

0.0

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In terms of the portfolio sector weightings, the fund's financial services sector holdings has a significant advantage over the benchmark and category average. Additionally, one can see that the fund's technology sector has a sizable deficit over its benchmarks.

Sector

GTDFX Stocks

Benchmark

Category Avg.

Financial Services

31.59

23.91

22.61

Technology

13.62

22.27

20.95

Click to enlarge

At first glance, it does not seem like the best idea for this fund to be so concentrated on the financial services sector. After all, the financial services sector ETF is the worst-performing sector ETF in the foreign sector and global sector. The iShares Global Financials ETF (NYSEARCA:IXG) has an YTD Return of -8.5% and the SPDR S&P International Financial Sector ETF (NYSEARCA:IPF) has an YTD return of -13.3%.

Yet, the following chart shows that the fund's financial services holdings have benefited the Invesco Developing Markets Fund Retirement for the most part. Here is the chart below:

Financial Services Holding

YTD Return

BMF Bovespa SA Bolsa Valores Merc Fut

46.14%

Kasikornbank Public Co Ltd Shs Foreign Registered

13.86%

Haci Omer Sabanci Holding AS

11.11%

Sberbank of Russia PJSC

27.44%

Public Bank Bhd

5.18%

Industrial And Commercial Bank Of China Ltd H

-12.39%

CETIP SA Mercados Organizados

Sberbank Of Russia Pfd

13.18%

18.59%

Credicorp Ltd

50.59%

Bank Bradesco SA ADR

56.30%

PT Bank Central Asia Tbk

-2.59%

Zenith Bank PLC

17.44%

PT Bank Mandiri (Persero) Tbk

-0.15%

Egyptian Financial Group-Hermes Holding Co

37.80%

Click to enlarge

On the other hand, the technology sector is on the lower end of successful ETFs in the foreign and global sectors. The iShares Global Tech ETF (NYSEARCA:IXN) has garnered a 0.1% sector in the foreign sector while the SPDR S&P International Technology Sector ETF (NYSEARCA:IPK) has a -2.4% YTD Return.

At the same time, the Invesco Developing Markets Fund has some favorable regional weightings. The fund has two favorable regional advantages in the Latin American region and the Europe Emerging region. Additionally, they have a favorable deficit in the Asia Emerging region. The regional weightings can be seen below.

Region

GTDDX Stocks

Benchmark

Category Average

Latin America

29.59%

12.84%

14.12%

Europe Emerging

17.46%

7.10%

8.41%

Asia Emerging

35.40%

42.56%

40.03%

Click to enlarge

Based on the performance of Latin American Emerging Market regional ETFs, the fund's advantage in the Latin American region is beneficial. After all, the SPDR S&P Emerging Latin America ETF (NYSEARCA:GML) has an YTD Return of 13.4% while the iShares Latin America 40 ETF (NYSEARCA:ILF) has a YTD Return of 14.9%. These two ETFS are the second and third best performers among Emerging Market ETFs.

The fourth best performing Emerging Market Regional ETF is the SPDR S&P Emerging Europe ETF (NYSEARCA:GUR) with a 9.3% YTD Return. On the other hand, the SPDR S&P Emerging Asia Pacific ETF (NYSEARCA:GMF) has an YTD Return of -1.2%.

Brazil may be the most impactful country in this fund. As you can see below, the Brazilian holdings in this fund has served to boost the performance of the Invesco Developing Markets Fund. Brazil is the second best performing Emerging Market Country ETF with a 30.6% YTD Return.

Brazilian Holding

YTD Return

BMF Bovespa SA Bolsa Valores Merc Fut

48.99%

Fleury SA

65.85%

CETIP SA Mercados Organizados

13.55%

BR Malls Participacoes SA

37.96%

Cielo SA

20.00%

Bank Bradesco SA ADR

60.42%

Duratex SA

25.42%

BRF SA

-17.26%

Totvs SA

-0.59%

Wilson Sons Ltd

-1.90%

Click to enlarge

In terms of the fund's expense ratio, the fund has had a recent history of having an expense ratio that is lower than both its benchmark and category average.

As you can see below, the GTDDX expense ratio is a little bit more expensive than the category average. However, this can be attributed to a slight decrease in the expense ratio of the category average from last year. Given the fund's performance, I believe that investors will find this fund affordable.

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Bottom Line

I believe the Invesco Developing Markets Fund is worth the investment due to its favorable sector weightings in the financial services sector. In addition, the fund has favorable regional advantages in the Latin American Region and Emerging Europe region.

Additionally, the fund has a favorable deficit in the Emerging Asia region as compared to its benchmarks. The emerging market of Brazil has had a major impact on the fund's performance so far in 2016.

The fund's overall affordability is the icing on the cake.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.