Checking In: Tell Beta Where To Go With This ETF

No, this is not the time to embrace beta. And it probably isn't the time for emerging markets ETFs, but there is a new kid on the block in the ever-expanding universe of emerging markets ETF that may just be worth look, even right now. The EGShares Emerging Markets High Income/Low Beta ETF HILO is the ETF we're talking about and the combination of high income and reduced beta makes the newly minted HILO an ideal candidate for this week's “Checking In” candidate. HILO is just a month old, so it's hard to pass judgment on an ETF with such a small amount of trading data, but in its infancy, HILO has shown its mettle. The new EGShares ETF has performed inline with comparable rivals such as the Vanguard MSCI Emerging Markets ETF VWO and the iShares MSCI Emerging Markets Index Fund EEM. With Europe's sovereign debt woes pressuring emerging markets ETFs of all stripes and inflation issues in Brazil hampering VWO and EEM, this is the type of environment where HILO has the potential to make inroads against its older rivals. HILO is home to 30 stocks that are selected as high income/lower beta plays compared to the offerings in VWO and EEM. Sure, HILO has an expense ratio of 0.85%, which is high compared to the aforementioned rivals, but VWO and EEM can't sniff HILO's yield of 5.54%. Beyond that, HILO allocates about 28% of its sector weight to telecom names, setting it up to be a more conservative offering than the run-of-the-mill multi-country EM ETF. Energy names, high-beta to be sure, account for less than 8% of HILO's sector allocation. Yes, HILO does have its high points, especially when compared to standard emerging markets ETFs, but HILO is still part of this troubled asset class. Looking at HILO's top four country weights, there are problems with each. Malaysia (18% of the fund's weight) has political issues. South Africa (17.3%) is facing slower GDP growth and high unemployment. Brazil (13.4%) and China (12.7%) have been battered by rising inflation. With Brazil and China accounting for about 26% of HILO's weight, that may diminish the ETF's attractiveness, but the reality is that in the near-term, HILO is likely to be less bad than its rivals and that might be as good as gets for emerging markets ETFs over the next couple of months. Keep an eye on HILO to break above the psychologically important $20 level. If that happens, the ETF should be in rally mode.