Russia-Based ETFs Dominate List of Top Performing Emerging Markets ETFs

Schwab Fundamental Emerging Markets Large Company Index ETF (NYSEARCA:FNDE)

Schwab Fundamental Emerging Markets Large Company Index ETF (NYSEARCA:FNDE) is another strong performer this year, having posted returns of more than 29.6% so far. The ETF is also focused on emerging markets large-cap stocks, but its selection methodology is quite unique, and results in a value-oriented portfolio comprised mostly of cheap stocks that trade around or below 10.3-times P/E and 0.9-times Price-to-Book. The fund picks Russell Global ex-US ex-developed-markets stocks based on revenue, cash flow and equity returns – dividends and buybacks. This results in a penchant for materials and energy stocks, although the fund has also invested in financials recently.

Same as its peer above, the Schwab Fundamental Emerging Markets Large Company Index ETF (NYSEARCA:FNDE) has substantial assets allocated to Brazil (19.1%), but also invests heavily in Russian companies (12.36%).

iShares MSCI Russia Capped ETF New (NYSEARCA:ERUS)

Year-to-date, the Dow Jones Industrial average has risen by about 3%. Over the same period, the iShares MSCI Russia Capped ETF New (NYSEARCA:ERUS) has surged byalmost 25.7%. This ETF invests in securities traded on Russian stock exchanges; “Marketlike exposure to Russian equities translates into high concentration risk—the portfolio is incredibly top-heavy and holds just a handful of names overall,” ETF.com stated, still defining it as a low-cost, great-coverage option.

iShares MSCI Russia Capped ETF New (NYSEARCA:ERUS) has almost half of its resources invested in energy stocks, but is also overweight financials and basic materials. This has resulted in the fund losing about 3.5% over the past month, as uncertainties about oil production limits lingered.

SPDR S&P Russia ETF (NYSEARCA:RBL)

Finally, there’s the SPDR S&P Russia ETF (NYSEARCA:RBL), which tracks the performance of the S&P Russia Capped BMI Index, investing in publicly-traded companies domiciled in Russia. However, the fund also invests in companies outside the Index, including VimpelCom Ltd (ADR) (NASDAQ:VIP) and Yandex NV (NASDAQ:YNDX), among others.

The SPDR S&P Russia ETF (NYSEARCA:RBL) also invests heavily in energy stocks, which account for more than 43% of its total assets. This has helped it deliver returns above 26% this year.

“Investors are starting to turn positive on emerging markets, and Russia has the potential to be one of the strongest emerging markets out there,” Adam Sarhan, chief executive officer of Sarhan Capital said, talking about the performance of Russian ETFs. “Oil remains very low compared to where it was two years ago, but the bounce we’ve seen since February has created a major input into Russia’s economy.”

Disclosure: Javier Hasse holds no interest in any of the securities or entities mentioned above.