Capturing Domestic Demand

In a recent interview with IndexUniverse, Holderith pointed to booming domestic demand as a key driver in many emerging markets economies, and one that’s often overlooked in broad-based strategies.

MSCI’s index, for instance, allocates more heavily toward economic sectors such as financials and energy that fail to capture the domestic demand themes, he said.

Sectors like consumer staples and discretionary, utilities, telecommunications and health care—what EGA calls “domestic demand sectors” and the ones EMDD seeks to capture—represent less than a third of the total MSCI Emerging Markets Index pie.

Details Of The Funds

BBRC tracks a free-float market-capitalization-weighted index that currently allocates to 12 countries and currencies.

South Africa is the fund’s largest exposure, at 18.7 percent of the portfolio, while Mexico comes second, with an 18.5 percent allocation. From a sector perspective, financials snag roughly a third of the mix, and telecommunication names represent nearly 19 percent. The remainder of the portfolio is split among six other economic sectors.

EMDD comprises 50 holdings and includes 11 countries and currencies. Mexico is the fund’s largest country allocation, representing nearly 25 percent of the mix.

Consumer staples, discretionary and telecommunication services each represent anywhere from 26 to 29 percent of the portfolio, with health care and utilities splitting the rest. The mix is rebalanced annually.

Both funds cost 0.85 percent in expense ratio.

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