The Rest of the EM Sector Funds Are Here

Emerging Global Shares, after a long time gap, filled out its suite of emerging market sector ETFs. There is some rebranding of the line and symbol changes for most of the existing funds that you can go to the website to learn more about if you are interested in that, I am more interested in whether or not there is any utility to the funds.

From the big picture, the idea is that for investors willing to make sector decisions, being able to choose from domestic, developed foreign and developing foreign allows for a more precise allocation. Obviously thematic ETFs are part of this discussion too.

Generally the group of EG funds is heavy in BRIC countries and South Africa with some other countries mixed in varying amounts, Mexico features prominently in a couple of funds. In eyeballing the funds some look very useful and some I wouldn't have much interest in.

The materials fund makes a great first impression. It is heaviest in South Africa followed by Russia, Brazil and China. It is a who's who of platinum miners, industrial metals miners and coal companies with client holding Vale (VALE) being the largest name in the fund.

I also like the telecom fund. It allocates 18% to China, 13% to Mexico and 11% each to South Africa and Brazil. If you look at the holdings you will see they cover a lot of ground in terms of small holdings from other countries. This sector, more than most of the others, should be able to easily cover a lot of ground because just about every country has a big phone company. Not so with technology and so that fund has about 44% each in India and China. The industrial sector fund looks interesting to me, it is heavy in India and cement companies.

For an account size where going to the sector level makes sense but three or four holdings for each sector does not then an investor can use a combo of different types of funds (domestic, developed, emerging) to build a portfolio that covers a lot of geography. For example (just an example) it might make sense for tech, staples, utilities and healthcare to be domestic, for discretionary, industrials and energy to be developed and for telecom, financials and materials to be emerging.

Also in this vein there might be a country fund that presumably you like that could serve a proxy for one or two sectors. So instead of needing to buy ten funds the for "right" sector specific portfolio it could have eight or nine holdings. Although we are out of Australia now, generically speaking the iShares Australia ETF (EWA) could serve as a proxy for financials and materials.

In portfolios where multiple holdings for sectors make sense then an even more specific allocation can be built which gets closer to holding individual stocks (many people are reluctant to go with individual stocks and although I think individual stocks should be part of the mix for a large enough account I realize many people will not do this).

The energy sector lends itself to this multi-fund blending. Like telecom, the energy sector is an easy way to go foreign because many countries have a large oil company. A combo of any broad foreign energy ETF as sort of an anchor and maybe for some yield, the Emerging Market Energy ETF with new symbol OGEM would probably have very little overlap and offer more direct access to areas where energy demand is increasing the most. Pair those two with something thematic like the Global X Uranium ETF (URA) and again very little overlap and despite what Germany plans to do I think nuclear will still exist. Perhaps somewhere in this mix something like the PowerShares Small Cap Energy ETF (PSCE) can fit in for a little domestic exposure. Again, a country fund could make sense as well; Thailand has a lot more energy than you might think (obviously the dynamics of the country and fund need to make sense, this is just an example).

Hopefully the post gives an idea of the wide range of possibilities that investors who put the time in have at their disposal. A lot of these product lines from different providers won't realistically make for a complete portfolio (no one is going to buy all ten emerging market sector funds) but implementing with funds from many families is realistic.

We are well into the 2011 College World Series. I've been watching this for years and we even went in 2007. One of the great things about this event was that no lead was ever safe. 10-1 in the ninth inning and the trailing team had a shot. This season they have changed the bats and the run production is down meaningfully and that has removed some of the excitement. Any other CWS fans feel this way?