Uncovering the Fund’s Foundations
Chuck Jaffe: Tackling the latest in investment opportunities, this is the ETF of the Week. Delving into the depths of the exchange-traded funds universe with the guidance of Todd Rosenbluth, VettaFi’s Head of Research. If you’re looking to up your ETF game, VettaFi.com is the place to be. Todd Rosenbluth, always a pleasure to chat with you.
Todd Rosenbluth: Great to catch up with you, Chuck.
A Timely Choice: XCEM
Chuck Jaffe: So, Todd, what’s our ETF of the Week?
Todd Rosenbluth: It’s the Columbia EM Core ex-China ETF (XCEM).
Chuck Jaffe: XCEM, focusing on emerging markets sans China. Why this particular fund at this moment, Todd?
Todd Rosenbluth: Emerging markets play a critical role in many investment portfolios. However, China’s recent struggle has been a weight on the broader emerging markets category, dampening performance both in 2023 and 2024. Investors are seeking ways to adjust their Chinese exposure, if not eliminate it entirely. The Columbia Fund presents itself as a viable option, offering low costs and broad exposure to key emerging markets while excluding China, allowing better management of market exposure.
Chuck Jaffe: The decision on emerging markets seems split between advocates of its value and skeptics wary of its tumultuous journey. Where do you stand on allocating funds to emerging markets, especially with China out of the picture to potentially reduce volatility?
Todd Rosenbluth: Balancing risk is key, particularly given the volatility historically associated with emerging markets, with China embodying a significant share. It’s advisable to designate around 5% to 10% of a diversified portfolio to emerging markets, offering exposure to burgeoning economies like India, Taiwan, and South Korea, in addition to others. Reducing China’s weightage from the 20% to 25% range in broader emerging market ETFs can help assuage concerns around volatility, valuation, and economic uncertainties in China.
Shifting Sands in Emerging Markets
Chuck Jaffe: The landscape of emerging markets has transformed considerably, from the era dominated by BRIC nations to a more diversified terrain. What’s your take on this shift and the importance of a more inclusive portfolio like XCEM for investors?
Todd Rosenbluth: The dynamics within emerging markets have evolved, with U.S. equities outshining for a while. However, new players like South Africa are emerging, emphasizing the need for diversified portfolios. XCEM’s strategic exclusion of China provides investors the flexibility to calibrate their exposure, either by combining it with a broader emerging markets portfolio or making it the sole choice to entirely sidestep China’s influence.
Chuck Jaffe: Observing the technical performance of XCEM against China-inclusive ETFs like EEM allows for a clear assessment of volatility reduction and profit potential. How do these comparisons shape the investment landscape?
Todd Rosenbluth: The positive technical trends of XCEM vis-a-vis Chinese-focused ETFs like EEM signify potential benefits for investors. Beyond technicalities, XCEM’s appeal lies in its more attractive valuations excluding China, promoting diversification across other emerging markets. While I’m more inclined towards fundamental analysis, riding the trend wave can yield favorable outcomes in the ever-evolving market scenario.
Closing Thoughts
Chuck Jaffe: Concluding on a note of comparison and strategic planning, the realm of emerging markets beckons with diverse opportunities and risks. Incorporating XCEM alongside incumbents like EEM and IEMG can shape a well-rounded investment portfolio. Always a pleasure, Todd. Until next time.
Todd Rosenbluth: Look forward to it, Chuck.
Chuck Jaffe: The ETF of the Week, a junction of VettaFi and Money Life wisdom. Stay engaged with us for the latest updates and insights on investment strategies. Happy investing, everyone!
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
