A Popular Emerging-Markets Consumer ETF Rocked by Currency Volatility
Large exposures in South Africa, Brazil, and Chile have weighed on the performance of this fund.
EGShares Emerging Markets Consumer (ECON) has enjoyed strong inflows since its launch in 2010, thanks to its portfolio of high-quality consumer firms that have direct exposure to one of the main drivers of growth in the emerging markets: the rise of the middle class. This exchange-traded fund invests in 30 large-cap consumer companies domiciled in the emerging markets (which in this case excludes Taiwan and South Korea). Many of these companies, such as Brazilian brewer and soft drink company Ambev (ABEV), Mexican convenience store operator and coke bottler FEMSA (FMX), and Russian grocery chain Magnit, are well-run, market-dominating companies with industry-leading profit margins.
Over the five-year period ended June 30, 2014, this fund's index generated significantly higher annualized returns relative to the market-cap-weighted benchmark MSCI Emerging Markets Index (20.0% versus 9.2%) on slightly less volatility. This was because the weaker areas of the emerging markets, such as China large caps and commodity names, are not included in this consumer fund.
Patricia Oey does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.