(84X0) iShares MSCI EM ex China - Ratings and Ratios

Naval Ravikant here. Let’s break down the iShares MSCI EM ex China UCITS ETF USD Acc (84X0 on XETRA). This ETF is a Germany-domiciled fund designed to give investors exposure to emerging markets, excluding China. It’s part of the broader global emerging markets equity category, tracking the Morningstar EM TME NR USD index.

With an AUM of 1.96 billion EUR, this fund is sizable enough to maintain liquidity but not so large that it becomes unwieldy. It’s structured as a UCITS-compliant ETF, which means it adheres to European regulations, offering a level of investor protection and transparency.

One key detail is that this ETF excludes China, which is a significant player in emerging markets. This exclusion can be a double-edged sword. On one hand, it avoids the unique political and regulatory risks associated with Chinese equities. On the other, it means investors miss out on the growth potential of one of the world’s largest and most dynamic economies.

From a portfolio construction standpoint, this ETF can be useful for investors looking to diversify their emerging markets exposure without China. However, it’s important to understand that the fund still carries the typical risks of emerging markets, such as currency volatility, political instability, and higher valuations compared to developed markets.

For fund managers, this ETF could serve as a core holding for non-China emerging markets exposure. However, they should be aware of the concentration risks in the underlying index. Emerging markets are often dominated by a few large countries and sectors, which can lead to uneven performance.

Lastly, investors should pay attention to the fund’s tracking difference versus its underlying index. Emerging markets can be challenging to replicate due to liquidity issues and trading costs. Additionally, the absence of P/E, P/B, and other financial metrics in the description suggests that investors need to dig deeper into the fund’s holdings to fully understand its valuation dynamics.