WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (XSOE) seeks to track the WisdomTree Emerging Markets ex-State-Owned Enterprises Index, which measures the performance of publicly traded companies in emerging markets while excluding state-owned enterprises. This equity ETF provides exposure to privately-owned companies across developing economies including China, India, Taiwan, and other emerging market countries.
How It Works
XSOE uses a fundamentally-weighted methodology that screens out companies with significant government ownership (typically over 20% state control) from the broader emerging markets universe. The fund weights remaining holdings based on fundamental metrics like earnings and dividends rather than market capitalization. Rebalancing occurs annually to maintain the exclusion criteria and fundamental weighting approach. Holdings span multiple emerging market countries with concentration in technology, consumer, and financial sectors from privately-controlled enterprises.
Key Features
- Unique exclusion of state-owned enterprises reduces exposure to government-controlled companies that may prioritize political over shareholder interests
- Fundamental weighting methodology emphasizes profitable companies rather than largest by market cap, potentially improving risk-adjusted returns
- Provides emerging markets exposure while avoiding governance risks associated with state-controlled entities across multiple developing economies
Risks
- This ETF can lose value if emerging market currencies weaken against the dollar, as foreign holdings lose value when converted back to USD
- Excluding state-owned enterprises may create sector concentration risk, as many emerging market utilities and banks have government ownership
- Emerging markets can decline 40-60% during global crises due to capital flight, currency volatility, and political instability affecting developing economies
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for experienced investors with 7+ year time horizons seeking emerging markets exposure with governance-conscious screening. High risk tolerance required due to emerging market volatility and currency fluctuations. Appropriate for investors who want developing market growth potential while avoiding state-controlled enterprise risks.