iShares Adds Emerging-Markets ETFs

NEW YORK (TheStreet) -- iShares is looking to add to its roster of emerging-markets ETFs with a filing for two new sector-focused funds last week.

The new iShares MSCI Emerging Markets Financial Sector Index Fund and iShares MSCI Emerging Markets Materials Sector Index Fund will join iShares emerging-market funds like iShares MSCI-Emerging Markets(EEM Quote) and iShares MSCI-Brazil(EWZ Quote).

The launch of these funds comes in the wake of a large influx of assets into emerging-markets ETFs. According to data from the National Stock Exchange, EEM had $1.76 billion in net inflows in October. Vanguard MSCI Emerging Markets(VWO Quote) reported $2.2 billion in net inflows during the same period.

Net inflows into EEM and VWO alone made up a sizable chunk of all net inflows across all ETF and ETN products. The October net inflows into EEM and VWO accounted for 45% of all net inflows into ETFs last month.

As investors consider purchasing one of the existing emerging-market funds, or one of the upcoming funds from iShares, they need to examine the three levels of concentration that can occur. While emerging-markets ETFs are a helpful tool for portfolio diversification, cap-weighted strategies and limited equity markets can lead to pockets of over-concentration in your portfolio.

The first level of concentration to consider is location. Broad emerging-markets funds like EEM and VWO diversify assets over a handful of emerging markets. The top five country holdings in EEM's portfolio are Brazil, South Korea, China, Taiwan and South Africa, with 14.83%, 12.43%, 11.16%, 10.41% and 8.08% allocations respectively.