National Security Emerging Markets Index ETF (NSI) seeks to track the National Security Emerging Markets Index, which measures the investment return of emerging market stocks while excluding companies that pose potential national security risks to the United States. This equity ETF provides exposure to developing economies like China, India, Taiwan, and Brazil with enhanced security screening.
How It Works
NSI uses a passively managed, market-capitalization-weighted approach that mirrors its benchmark index after applying national security exclusions. The fund screens out companies involved in activities deemed threatening to U.S. national security, including certain Chinese military contractors, surveillance technology firms, and state-owned enterprises. Rebalancing occurs quarterly to maintain index alignment and update security screenings. Holdings span major emerging markets with typical concentration in technology, financials, and consumer sectors.
Key Features
- Applies national security screening to exclude potentially problematic emerging market companies, differentiating from standard EM ETFs
- Launched in December 2023, making it one of the newest security-focused emerging markets investment options available
- Zero expense ratio currently listed, though this may reflect temporary fee waivers or data reporting delays for new fund
Risks
- This ETF can lose value if emerging market currencies weaken against the dollar, potentially reducing returns by 10-20% annually during currency crises
- Security screening may exclude major holdings like Alibaba or Tencent, creating tracking differences versus broad emerging market benchmarks and concentration risk
- Emerging markets can decline 40-60% during global financial stress as investors flee to developed market safety, with higher volatility than U.S. stocks
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for investors with 5+ year time horizons seeking emerging markets exposure with national security considerations. High risk tolerance required due to emerging market volatility and currency fluctuations. Appeals to investors prioritizing geopolitical risk management alongside international diversification in retirement or taxable accounts.