Emerging markets equities and the corresponding exchange traded funds are rebounding, but as has been seen in previous eras of emerging markets bullishness, this asset class is not always known for smooth sailing.

The MSCI Emerging Markets Index has a three-year standard deviation of 14.8 percent, well above the comparable metric on the S&P 500 and the MSCI EAFE Index.

What Happened

For investors looking to nibble at emerging markets stocks with lower volatility, the iShares Edge MSCI Min Vol Emerging Markets ETF (CBOE: EEMV) is a sensible option. EEMV is up almost 6 percent year-to-date compared to a gain of about 9 percent for the MSCI Emerging Markets Index.

Why It's Important

EEMV's three-year standard deviation of just over 11 percent is inline with those of some major developed market indexes, indicating the fund is doing its job a volatility-reducing play on developing economies.

Amid last year's emerging markets swoon, EEMV did its jobs. The low volatility fund was 680 basis points less volatile than the MSCI Emerging Markets Index while declining just 5.8 percent compared to 15.3 percent for the MSCI index.

What's Next

China, Taiwan and South Korea, which are usually among the least volatile emerging markets, combine for nearly half of EEMV's geographic exposure. Evaporating trade war fears could bolster the case for emerging markets stocks this year, potentially providing some upside for EEMV along the way.

“Recently, we have seen trade wars disrupt and pressure EM; however, we believe that much of the potential impact of these trade wars has already been priced in,” said BlackRock. “That said, volatility may escalate or subside from here.”

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