It tracks an emerging market index built on the Research Affiliates Fundamental Index methodology. Instead of market capitalization, it sets holding weights based on a company's real economic size (sales, cash flow, book value, and dividends), which differentiates it from market-cap-weighted approaches.

It suits investors who want diversified exposure to emerging markets with less market-cap bias and a fundamentals-driven, value-oriented approach.

Invesco launched it in 2007 as a passively managed (index-tracking) ETF.

Fundamental weighting sets holding weights using the average of four company metrics: sales, cash flow, book value, and dividends. This approach automatically reduces the weight of stocks whose market caps are overvalued and raises the weight of stocks that look undervalued relative to their fundamentals.

• Weighting based on four core fundamental metrics instead of market cap
• Structurally higher allocation to value-oriented stocks within emerging markets

Assets under management (AUM) stand at $2.0B, and the total expense ratio is 0.47% per year.

Compared with market-cap-weighted emerging market ETFs, fundamental weighting can produce different country and sector concentrations, and its fees are somewhat higher than those of typical passive emerging market ETFs.

Emerging markets are highly sensitive to macro variables such as a stronger dollar, the interest rate environment, and China's economy. Fundamental weighting can lag market-cap approaches in momentum-driven markets, but it tends to hold up better when valuation excesses are being unwound.

Across emerging market ETFs in general, fund flows depend heavily on the direction of the dollar and global risk appetite. Value-oriented, fundamental-weighted ETFs tend to draw relatively more attention when preference for growth stocks fades, and Invesco continues to maintain its lineup based on this methodology.

Its defining feature is fundamental weighting free of market-cap bias, while its drawbacks are the country and currency risks unique to emerging markets and somewhat higher fees.

FNDE, shown in the table, is an emerging market fundamental-weighted ETF run by Schwab. Its strategic direction is similar to PXH, though its fees differ. FRDM takes a different approach, tracking a freedom-based index that also includes frontier markets, and XSOE focuses on privately owned emerging market companies, excluding state-owned enterprises. EMGF is an emerging market factor ETF run by Fidelity that takes a multifactor approach, and GEM is an ETF offering broad emerging market exposure. If you prefer mainstream market-cap-weighted emerging market ETFs, EEM and VWO are also worth comparing.

Here are the points to review before investing in PXH. The characteristics of fundamental weighting and the risks unique to emerging markets differ from those of typical index ETFs, so it is important to understand them thoroughly in advance.

Political, regulatory, and currency risks unique to emerging markets act in combination, and fundamental weighting does not always guarantee an advantage over market-cap weighting. In particular, there may be periods when it is at a relative disadvantage in growth-led markets.

It is a meaningful option for investors who want to approach emerging markets on a fundamentals basis. Given the differences in fees and management strategy, it is reasonable to compare it with FNDE, EEM, and VWO before choosing.