Invesco has launched an exchange traded fund (ETF) for investors wanting to have core emerging market equity exposure.
The new ETF, which provides exposure to more than 300 stocks across 30 emerging markets around the world, has been designed to provide investors with optimal exposure to five factors: value, momentum, quality, low beta and size.
Invesco Goldman Sachs Equity Factor Index Emerging Markets Ucits ETF applies the same methodology found in the firm’s already established range of multi-factor strategy products, which has more than $1.1bn (£840m) of assets under management.
The ETF aims to outperform a traditional market-cap weighted benchmark with less volatility and maintaining similar country and sector weights.
In addition Invesco has cut the ongoing charge (OCF) on the Europe ETF to 0.45 per cent a year, from 0.55 per cent, to make multi-factor ETFs listed in Europe more attractive to investors,
It has also reduced the OCF on the World version to 0.55 per cent a year from 0.65 per cent.
We’re now seeing the quality of data on emerging market companies improving to the point where we can also capture these long-term drivers of outperformance in these markets. Chris MellorChris Mellor, head of Emea ETF equity product management at Invesco, said: "The difficult part for investors has always been how to capture the out-performance potential of individual factors throughout the cycle.
"The strategy used in our ETF combines factors efficiently, taking into account the volatility and correlations between each factor."
He added: "Until now, factor strategies have focussed predominantly on developed markets. However, we’re now seeing the quality of data on emerging market companies improving to the point where we can also capture these long-term drivers of outperformance in these markets.
"We believe our new ETF offers investors something different for their emerging market exposure."
Mr Mellor said that as these ETFs aimed to deliver better returns than traditional benchmarks, but with lower volatility, investors might want to use them as stand-alone replacements or to supplement their existing core holdings.
Gavin Haynes, managing director of Whitechurch Securities, said: "The new ETF would be something to look at. However, it isn’t something we would typically use.
"Instead we prefer to use active fund managers when dealing with emerging markets in order to achieve an increasingly diversified portfolio."
Arun Mohammed is an intern with Financial Adviser
