AVEM targets profitable, value-oriented companies in emerging markets while avoiding the typical market-cap weighted approach that overweights expensive mega-caps. It's designed for investors who want EM exposure but are skeptical of paying high multiples for state-owned enterprises and index heavyweights.
How It Works
The fund uses a systematic approach that tilts toward smaller, more profitable companies trading at reasonable valuations across emerging markets. Unlike passive EM funds that concentrate in Chinese tech giants and Korean chaebols, AVEM spreads its bets more evenly across countries and sectors. The strategy rebalances based on profitability metrics and relative valuations, not just market cap.
Key Features
- Avoids the mega-cap concentration trap that plagues most EM indices
- Systematic value tilt captures the EM value premium without manager risk
- More balanced country exposure reduces single-market concentration risk
Risks
- Currency swings can erase 10-20% of returns in bad years — no hedging here
- Political instability can shut down entire country allocations overnight
- Value tilt means missing out when expensive growth stocks lead EM rallies
Who Should Own This
Best for patient investors who want emerging markets exposure but distrust the MSCI EM Index's heavy tilt toward expensive Chinese internet companies and Samsung. Works well as a 5-10% portfolio position for those comfortable with volatility and currency risk in exchange for higher expected returns over full market cycles.