This is an active ETF that invests mainly in emerging market company stocks, concentrating on a relatively small number of holdings chosen by the portfolio managers. Stocks are selected based on long-term growth potential, regardless of market capitalization.

It suits long-term investors who prefer a concentrated set of selected emerging market stocks over broad index diversification and who are willing to tolerate high volatility.

It is an ETF managed by Nomura using an active (actively managed) approach.

The fund takes an active approach, building a relatively concentrated portfolio of companies that the portfolio managers believe have high long-term growth potential in emerging markets. It places no limit on market capitalization when picking stocks, and it seeks excess returns through active stock selection rather than tracking a broad index.

• Active stock selection by the portfolio managers
• Concentrated structure with a small number of selected stocks

Assets under management (AUM) are $592.9M, and the expense ratio is 0.85% per year.

Compared with broad emerging market index ETFs such as VWO and IEMG, the main points of comparison are stock concentration and management style.

Emerging market stocks react sensitively to global risk appetite, dollar strength or weakness, and commodity cycles, and they tend to show greater volatility than developed markets. Because of its concentrated portfolio structure, the gap between its performance and the market average can widen further.

Fund flows into and out of emerging market stocks diverge sharply depending on the direction of the dollar and risk appetite, and for actively managed concentrated products, fund flows tend to depend on investment performance. It is also worth keeping in mind that volatility can be high due to country-specific policy and currency factors.

Active stock selection and concentrated investing are both its strength and its weakness, and the volatility inherent in emerging markets and the risks that come with concentration are considerations.

Direct substitutes for core emerging market exposure include lower-fee, broad passive products such as VWO and IEMG, which track the market average broadly. The two products shown in the table, AVEM and EMXC, offer different exposures, using a factor-based approach and a China-excluded approach, respectively. Investors seeking high dividends can also consider DEM, those who want to reflect political freedom criteria can consider FRDM, and those who want simple passive exposure can consider SPEM. This ETF's differentiating criterion is its concentration in a small number of selected stocks.

Here are the points to review before investing in EMEQ. The potential for excess returns from concentrated management is attractive, but concentration risk, volatility, and exchange rates should be checked in advance. It is also a good idea to compare it with broad emerging market products.

Concentration in a few stocks, emerging market political and currency factors, and exchange rate movements are the main drivers of short-term performance, and because of the concentrated structure, performance can diverge sharply from the market average. In risk-off phases, declines can be larger than those of broadly diversified products.

It is a suitable candidate for long-term investors seeking excess returns in emerging markets through active stock selection. Those who prioritize cost and broad diversification should consider passive products such as VWO and IEMG, while those who trust the concentrated management capability should compare this product alongside them before choosing.