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New Fund Targets Emerging Markets Middle Class Growth

That EMDD has no energy exposure is surprising, but most integrated oil companies are multi-national. For example there is news on a regular basis about the Chinese oil majors investing all over the world, including Africa and South America, which would conflict with the domestic demand theme of the fund.

The fund has 50 holdings and while Walmart de Mexico is likely to be familiar, most of the names will not. The EG Shares literature indicates that the index underlying the fund yields 2.62 which after accounting for the 0.85% fee means that the fund might yield 1.75%.

There are quite a few countries that are either not represented in EMDD or do not have enough weight in the fund to have any meaningful impact on returns. Countries omitted include Colombia, Poland and Turkey. Countries that are too small to influence the fund's performance include Chile and Thailand.

The countries that are omitted or simply have low weightings all have compelling stories and risk factors to sort out. But the biggest drawback to EMDD would appear to be the relatively large weightings to a handful of countries.

This is easily mitigated in the context of using EMDD as a core emerging market holding and filling in the gaps with smaller positions in individual stocks or narrower ETFs for segments not covered by EMDD. Lastly, given the relatively large weighting to Mexico it is important that anyone considering using this fund must be favorably disposed to investing in Mexico.

At the time of publication, the author held no positions in any of the stocks mentioned.

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