VanEck lists multi-factor emerging markets ETF in Australia

Apr 10th, 2018 | By | Category: Equities

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VanEck Vectors has launched a smart beta emerging markets ETF – the VanEck Vectors MSCI Multifactor Emerging Markets Equity ETF (EMKT AU) – on the Australian Securities Exchange.

VanEck head of Asia Pacific Arian Neiron

Arian Neiron, head of Asia Pacific, VanEck Vectors.

The fund tracks the MSCI Emerging Markets Diversified Multiple-Factor Index, providing Australian investors with exposure to 24 emerging markets, including China.

The multi-factor index is constructed by filtering its parent index, the MSCI Emerging Markets Index, to maximize exposure to four factors: quality, value, momentum and low size. The parent index has 846 constituents, whereas the multi-factor version has 159.

It uses an optimization process based on the Barra Equity Model to maximize exposure to the targeted style factors while maintaining market risk similar to that of the parent. 

The MSCI Emerging Markets Index is most highly exposed to China (29.9%), followed by South Korea (15.1%) and Taiwan (11.8%). The multi-factor index has a higher level of concentration at the top two country exposures: China represents 36.0%, followed by South Korea at 19.9% and Taiwan at 11.4%.

Information technology (27.8%), financials (24.0%) and consumer discretionary (9.5%) represent the three highest exposures for the parent index. These follow in the same order for the multi-factor index, however, their proportions differ: information technology represents 26.5%, financials 16.2% and consumer discretionary 14.6%, making financials significantly underweight in the multi-factor version.

EMKT has a management fee of 69bps.

Arian Neiron, head of Asia Pacific, VanEck Vectors, said, “The index EMKT tracks is a rules-based smart beta strategy that has a strong history of outperformance compared to the benchmark MSCI Emerging Markets Index.”

The multi-factor index has returned 10.3%, 6.9%, and 5.8% per annum over the past three, five and ten-year periods respectively. The MSCI Emerging Markets Index has returned 8.8%, 5.0% and 3.0% per annum over the same intervals.

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