Under The Hood: A Large-Cap EM ETF No One Is Talking About

The universe of multi-country large-cap emerging markets ETFs is dominated by two players: the iShares MSCI Emerging Markets Index Fund EEM and the Vanguard Emerging Markets ETF VWO. These two ETFs are the Coke and the Pepsi of multi-country EM ETFs.

Despite the dominant market positions held by EEM and VWO, other ETF issuers have not been shy about entering this space and give credit to Emerging Global Advisors for making a decent effort with the EGShares Emerging Markets Large Cap ETF EEG, the subject of today's "Under the Hood" segment.

EEG is another example in a long line of ETFs that an investor may want to like, but should not. At least not right now because the market environment simply isn't conducive to an ETF that devotes almost a quarter of its weight to Brazil. China and India combine for another 33% and we have a real mess on our hands that has only been salvaged by 14.5% exposure to Russia and a 26.4% weight to oil names on the sector front.

Top EEG holdings investors may already be familiar with include Petrobras PBR, Brazil's state-run oil giant, Vale VALE, the world's largest iron ore maker, PetroChina PTR, China's largest oil company, and America Movil AMX, Latin America's top mobile phone service provider.

Overall, EEG's 86 holdings have an average market cap of over $43 billion. The knocks on EEG, beyond the market environment bit previously mentioned, include a high expense ratio at 0.75% and weak volume. EEM and VWO are superior on both fronts.

Here's the skinny: Emerging Global has some unique ETFs and it might be fair to consider the firm "underrated" as far ETF issuers go. EEG is a good idea, too, just not now. There will be a time when it's wise to be back in Brazil, China, etc. and that will be the time to own EEG. There's no point to running in now when a better entry point can be had next month.

EEG is almost two years and is not optionable, nor is it shortable.