This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

ETFs in the BRICs May No Longer Do the Trick

NEW YORK (TheStreet) --The emerging-markets theme has taken a beating in the last couple years and the losses have intensified in the new year. The iShares MSCI Emerging Markets ETF (EEM) was down 5% in 2013; so far in 2014 it has dropped almost 8%.

All investment themes go through stages where in the beginning just about everything goes up for the newness or perceived newness of the investment idea, then the concept matures requiring more and more selectivity in choosing the best way to capture the evolution of that theme.

Ten years ago emerging markets, most notably the so called BRIC markets of Brazil, Russia, India and China, required very little analysis. In a five-year period ending in June 2008 the iShares MSCI Brazil ETF (EWZ) went up 818%, according to Google Finance. In that same period the Templeton Russia & East European Fund (TRF) was up 172%, the India Fund (IFN) was up 304% and the China Investment Fund (CHN) was up 125%. TRF, IFN and CHN are closed-end funds. There were no exchange-traded funds tracking these countries in the time studied.

In the last five-year period those four funds have struggled. Emerging markets have, in general, done poorly; for instance, EEM is down over 20% in the last three years.

Where selectivity now is paramount to success in developing market investing, it makes sense to look at parts of the theme that are less mature -- i.e., where the BRICs were 10 years ago -- as well as segments where money is being spent and demographic trends.

So-called frontier markets capture the less-mature investment destination idea. Part of the reason for the early success of investing in the BRIC courtries was that, coming off of the Internet stock craze, the BRICs were  under-invested.

Today, there are over 100 ETFs that are either devoted to BRICs or are BRIC-centric, with assets greater than $100 billion, according to ETF.com. This compares to nine frontier market ETFs totaling just under $1 billion.

Of these, the iShares MSCI Frontier 100 ETF (FM) is the largest fund in the space, at $500 million. It tilts heavily to the Middle East with a combined 54% to Kuwait, Qatar and the United Arab Emirates. Like many developing market funds, financials are the largest sector of the fund at 53%.

The other large fund in the frontier space is the Market Vectors Vietnam ETF (VNM), with $400 million. Recently, however, Barron's reported that VNM is running into complications with ownership restrictions that limit foreign control of Vietnamese companies to 49%.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $124.43 -1.54%
FB $82.22 -1.18%
GOOG $548.00 -0.73%
TSLA $188.77 -0.94%
YHOO $44.44 -1.15%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs