The obvious starting point for those wanting an emerging markets tracker is the MSCI Emerging Markets index. This is dominated by Asian equity markets, at almost 55% of the total, with Latin America accounting for around 22% (mostly in Brazil and Mexico). Africa represents around 8%, almost exclusively in South Africa, while Russia has a 6% presence. Financials are the largest sector at 25%, followed by IT at 15% (reflecting the presence of Korea and Taiwan). Energy and materials are around 14% each, followed by telecoms at 10%.

Overall, this is a useful benchmark and has proved popular with investors and providers alike. The largest European vehicle tracking this index comes from db x-trackers, which has around €2.3 billion in its relevant ETF; like all the x-trackers range, it’s a swap-based product that capitalises dividends, with a total expense ratio (TER) of 0.65% per annum. Meanwhile, iShares has €2.1bn under management in its vehicle; as usual for iShares, this is a physically replicated (or “in specie”) fund, and has a TER of 0.75%.

Lyxor also has a swap-based fund based on this index that pays annual dividends and has a TER of 0.6%.  And Credit Suisse’s XMTCH range includes an in specie fund that pays semi-annual dividends on a TER of 0.7%, listed in Germany and Switzerland only.

Bid/ask spreads on these four funds these have averaged around 0.4%-0.6% over the past year for their most liquid listing, according to Bloomberg data.

iShares also continues its niche of small-cap versions of popular benchmarks with a MSCI Emerging Markets Small Cap ETF, quoted in the UK and Germany. This has a TER of 0.74% and pays semi-annual dividends. The Asia weighting is even higher, at 65%, than in the main MSCI emerging markets index; Taiwan accounts for 20%, followed by China (18%) and Korea (14%). The largest sector is consumer discretionary (22%), followed by industrials (20%), financials (16%) and IT (14%). In common with most smaller EM funds, the bid/ask spread is significantly wider, averaging around 2%.

Several providers have funds based on the Bric (Brazil, Russia, India and China) grouping. Whether these benchmarks are really best practice in index construction is debatable; they lump together four very different economies largely for marketing convenience. In particular, investors should be aware that almost every stock is in these three ETFs is government-controlled or heavily influenced and may often operate in the interests of its country rather than shareholders.

However, they have proved fairly popular. iShares operates the largest, with €500 million in assets; it pays semi-annual dividends and is listed across most of Europe, on a TER of 0.74%. This tracks the FTSE Bric 50 index, where Brazil accounts for 39%, China for 38%, Russia for 14% and India for 9%. Financials and energy dominate at around 30% of the basket each, followed by materials at 20%.

EasyETF’s vehicle tracks the Dow Jones Bric 50 index; this means a higher weighting for India at 20%, with most of the adjustment coming out of the China position. Financials are the largest position again, at around 40%. Like other EasyETF funds, it’s swap-based with reinvested dividends; the TER is 0.65%.

Finally in this category, the RBS-managed Market Access DAXglobal ETF is around 40% in energy and 28% in financials; the 40-stock portfolio includes ten from each country. The fund is swap-based, reinvests dividends and has a TER of 0.7%; the average bid/ask spread is wider than usual at 1.5%.

The Next 11 grouping of eleven non-Bric countries thought likely to be major economies in the 21^st century has never captured investors’ attention in the same way as the Brics; however, EasyETF has tried its luck with a fund based on this universe. In practice, several of these countries are difficult to invest in, so the ETF is dominated by Mexico (24%), Korea (23%), Turkey (20%) and Indonesia (16%); there are small weightings in Egypt, Philippines, Pakistan and Vietnam, with Iran, Nigeria and Bangladesh omitted altogether. Financials are the largest holding at 29%, followed by consumer discretionary at 17%. The TER is 0.85% and the bid/ask spread is 2%.

For very adventurous investors, there’s the db x-trackers S&P Select Frontiers, which aims to track the most liquid frontier markets. Consequently, the make-up of the basket is very unconventional, with the largest holdings being Kuwait (22%), Colombia (17%), Nigeria (10.5%) and Kazakhstan (10%). It’s a niche product with less than €15 million in assets, but an intriguing one for those who want access to more obscure markets. The TER is 0.95% and the bid/ask spread has recently averaged around 0.9%

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