The iShares MSCI Emerging Markets exchange traded fund (NYSE: EEM – $41.74) seeks to track the investment results of an index composed of large and mid-capitalization emerging market equities. The entire portfolio consists of about 800 foreign stocks domiciled in what are considered to be developing markets with above average growth rates. The top ten holdings make up about 16.5% of the portfolio of this tracking fund as follows:
Needless-to-say, the four countries (Brazil, Russia, India and China) that exclusively made up the S&P SPDR BRIC 40 ETF are highly weighted in the iShares MSCI fund, but to a lesser extent and are accompanied by a number of other countries including South Korea, Taiwan, South Africa, Mexico and 28 other nations. Below is how the fund stacks up by region:
The fund is also well diversified across a number of industry sectors, led by banks (18% of the total portfolio), oil and gas (10.5%) and semiconductors and semiconductor equipment (9%). In all, the ETF is composed of the following major market sectors:
The fund is administered by BlackRock Fund Advisors that uses a “passive” or indexing approach to try to achieve the fund’s investment objective. It generally invests at least 90% of its assets in the securities and in depositary receipts representing securities of its underlying MSCI index. Thus the management fees are relatively low at 0.67% of the portfolio value, especially when compared to a managed mutual fund that invests in like investment objectives. The shares have returned semi-annual distributions that are currently $0.366 per share which, if continued at that rate, would yield 1.75% annually at current quotations. Morningstar currently ranks EEM at three out of five stars for performance. While not without risk, I believe that over time the iShares MSCI Emerging Markets ETF will provide a core addition to an aggressive equity account. I am also maintaining the five percent allocation to the portfolio as was given to the former BRIC 40 ETF, for now.