The Emerging Markets Internet & Ecommerce ETF (EMQQ US) has hit $1 billion in assets under management.
Kevin Carter, Founder of EMQQ.
The milestone has been reached on the back of stellar market performance and robust investor demand. The fund is up 57.9% year to date and has added more than $300m in cumulative net monthly inflows.
Launched on NYSE Arca in 2014 in partnership with Exchange Traded Concepts, the fund is linked to the proprietary, rules-based Emerging Markets Internet & Ecommerce Index, providing targeted exposure to the internet and ecommerce sectors of the developing world.
The index is overseen by a committee that includes Wealthfront CIO and long-time Princeton professor Burton Malkiel, erstwhile eBay India CEO Latif Nathani, and former EGShares CIO Richard Kang.
To be eligible for inclusion in the index, a company must derive a majority (> 50%) of its profits, revenues or assets from internet and ecommerce activities in emerging or frontier market countries. Qualifying activities encompass themes such internet services, internet retail, internet broadcasting, internet media, online advertising, online travel, online gaming, search engines, and social networks.
In addition, companies must have a free-float-adjusted market capitalization of at least $300 million at the time of inclusion (at least $200m for ongoing inclusion) and a three-month average daily turnover of at least $1m.
Securities that meet these criteria are then selected to form the index. Constituents are weighted by a modified float-adjusted market capitalization scheme that incorporates an individual security cap of 8% and a maximum aggregate weight cap of 50% for stocks representing 5% or more.
The index currently comprises 83 companies – notable positions include Meituan Dianping, Alibaba, Tencent, Mercadolibre, and Naspers – up from 43 at inception. The near doubling of constituents over the past six years is testament to the growth of the internet and ecommerce industries in emerging and frontier markets.
Many investors believe that the growth of consumption in emerging markets represents a significant investment opportunity as more than one billion people are expected to enter the consumer class in the coming decades. Increasingly, these consumers are using smartphones and broadband mobile connections to access the internet.
McKinsey & Company have dubbed this “the biggest growth opportunity in the history of capitalism.”
At the fund’s most recent semi-annual rebalance, Kevin Carter, the founder of EMQQ, said, “The performance of the emerging markets internet and ecommerce space in 2020 has been a bright spot not just in EM investing but in looking across global markets as well, and has been achieved despite the ongoing COVID-19 pandemic, seemingly never-ending trade tensions, and delisting threats in the United States.
“But this has the potential to be much more than a quarter-to-quarter or even year-to-year story. COVID-19 seems to have acted as an accelerator for smartphone ecommerce in emerging markets. This, coupled with what we believe to be strong fundamentals and attractive valuations, could continue to offer further potential for emerging markets internet and ecommerce companies to see potential growth going forward.”
The fund has a European-domiciled counterpart, the EMQQ Emerging Markets Internet & Ecommerce UCITS ETF, which is listed on the London Stock Exchange (EMQQ LN / EMQP LN), Borsa Italiana (EMQQ IM), Xetra (EMQQ GY), and SIX Swiss Exchange (EMQQ SW).
This UCITS fund was brought to market in October 2018 with white-label issuer HANetf and has proved similarly successful. It has pulled in more than $115m in assets since its launch, theoretically constituting a faster rate of like-for-like asset growth than the US-listed fund experienced in its fledgling years.
Both funds come with an annual expense ratio of 0.86%.
(Data as of market close September 2, 2020)