It is an innovation in emerging market investing. A series of ten sector-based Exchange Traded Funds (ETFs) that can allow investors to make specific choices and manage their exposure to emerging markets.
So instead of choosing the prix fixe menu, GEMS is like ordering á la carte.
The power of GEMS lies in the potential diversification of investments into discrete sectors. Discriminating ETF investors no longer need to buy all sectors in the market, but can focus exposure on defined areas. From energy, technology and telecom, to basic materials, industrials and utilities. From the financial sector to health care to consumer services and consumer goods. You don't have to use a broadly based index to own emerging markets. You can create the exposures you want in the sectors you want.
Another feature of GEMS is the choice of indexes that are designed for investment rather than benchmarking. We believe we follow the most relevant index in emerging markets, Dow Jones Emerging Markets Titans - the emerging market index that contains only emerging markets based companies. The Titans Indexes exclude South Korea, Taiwan and other advanced economies as determined by the International Monetary Fund.
With only 30 stocks per sector, we believe the Titans methodology results in a select cut of emerging market equity, with an average market cap of $60.4 billion. Currently the MSCI Emerging Markets Index has an average market cap of $38 billion. The Titans are completely transparent and the holdings are available online.
The thirst for liquidity
Also important is the liquidity of the securities represented in the Titans. It's a common misconception that liquidity is directly related to the number of shares the ETF trades each day1. And emerging markets themselves have sometimes been challenged by thinner markets and limited liquidity2. The Titans methodology seeks to provide a selection of equities with higher than average emerging market liquidity and daily trading volumes.
You no longer need to venture into emerging markets like a tourist.
Market price returns are based on the midpoint of the bid/ask spread at 4 p.m. ET and do not represent the returns an investor would receive if shares were traded at other times.Diversification does not protect against loss.
This fund will concentrate its investments in issuers of one or more particular industries to the same extent that its Underlying Index is so concentrated and to the extent permitted by applicable regulatory guidance. Concentration risk results from maintaining exposure to issuers conducting business in a specific industry.