ETF Showdown: Low Beta, High Stakes (EELV, EEMV, HILO)
The EGShares Low Volatility EM Dividend ETF (NYSE: HILO) was one of the first entrants to the low volatility emerging markets ETF fray and it's one of the better options to this day. HILO's success arguably prompted the introduction of the iShares MSCI Emerging Markets Minimum Volatility Index Fund (NYSE: EEMV) and PowerShares followed up with the PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSE: EELV).
It will be the iShares and PowerShares offerings squaring off in this week's ETF Showdow and we're not going to knock EELV for having just over $5 million in assets under management because the ETF is now only a week old. Along those lines, EEMV deserves some credit for raking in more than $101 million in AUM since its October debut.
EEMV is home to 202 stocks, financials lead the sector weights at over 23% and staples, telecom, utilities and health care names combine for about 40% of EEMV's weight.
The The PowerShares S&P Emerging Markets Low Volatility Portfolio is home 199 stocks, nearly 26% of which hail from the financials services sector. Staples and utilities combine for another 30.5%. Bottom line: Both funds give double-digit allocations to three sectors. Both like financials and staples, but EEMV prefers telecom over EELV's utilities stake.
In terms of expenses, the iShares offering is slightly cheaper with fees of 0.25% compared to 0.29% for the PowerShares fund.
What's integral to the performance of low beta/low volatility emerging markets ETFs is the country weights. In theory, that should mean large weights to South Korea and Taiwan. That is EEMV's reality as those countries combine for over 24% of the fund's weight. China and Brazil combine for another 26%. Overall, that's not a surprising country mix for an ETF of this nature.
On the other hand, the PowerShares S&P Emerging Markets Low Volatility Portfolio devotes over 23% of its weight to Malaysia and almost 19% to South Africa, two markets that are arguably higher up on the volatility totem pole than South Korea and Taiwan. EELV also intrigues with a larger allocation to Latin America ex-Brazil with a combined 15% weight to Chile, Colombia and Mexico.
Both funds are heavy on large-caps, but more than 51% of EELV's weight goes to mid-caps. Not to mention, EELV has a P/E ratio of 14 and trades for less than 2x book value. Those numbers jump to 18.6 and 4.1 with the EEMV. Take that fact and combine with what looks to be a country mix with better profit potential and EELV celebrates the end of its first week of trading with an ETF Showdown victory.
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