The ETF will seek to exploit demographic-based growth potential in the world’s emerging economies, where populations younger than those found in developed countries are expected to continue increasing consumer spending through time.
WisdomTree will utilize a broadly diversified approach for managing the fund to reflect the wide-ranging growth of consumption in the developing world. Fund managers also designed a new framework to address valuation sensitivity challenges presented by emerging market ETFs.
Specific features of the ETF include a diversified basket of earnings weighted securities, generating at least 60% of revenue from the emerging markets and no more than 25% of revenue from the U.S., Europe or Japan.
Fund managers will seek to incorporate both consumer- and nonconsumer-sector stocks with the best combined rank of growth, quality and valuation factors. The fund will undergo annual index rebalancing, with a single stock cap of 5%, a country cap of 25%, a 60% allocation to specific consumer sectors and a 40% allocation to other sectors.
Jeremy Schwartz, director of research for WisdomTree, said the fund will be differentiated by its concentration on diversification and valuation accuracy.
“We have designed EMCG to provide exposure to broad cross sections of the markets, beyond one or two sectors, in companies we believe are positioned to benefit from the growth of emerging market consumption,” Schwartz said. “We marry this stock selection with a rigorous, rules based framework to incorporate a sensitivity to valuations in our exposures.”
Copies of the WisdomTree Emerging Markets Consumer Growth Fund prospectus can be obtained at www.wisdomtree.com, or by calling 866-909-9473.