3Settimana·

Concentration Risk? Xtrackers MSCI Emerging Markets ETF (XMME)

The ETF is considered broadly diversified with over 1,200 holdings—but if you look at the top 5, the picture looks a bit different:

• TSMC – 14.42%

• Samsung Electronics – 7.75%

• SK Hynix – 6.58%

• Tencent Holdings – 2.71%

• Alibaba – 2.06%

Combined: ~33.5% of the ETF in just 5 stocks

Of these, 3 are pure semiconductor/chip stocks (TSMC, Samsung, SK Hynix)—all heavily dependent on the AI hype. On top of that, TSMC is geographically right in the middle of the Taiwan conflict.

For an ETF that advertises “broad diversification across emerging markets,” this feels to me like a hidden concentration risk. If the AI hype fizzles out or tensions escalate in the Taiwan Strait, the ETF will be hit twice as hard.

What do you think?

$XMME (-0,91%)

11 Commenti

barradas33@emppsb

3Settimana

True, this a problem across all the major ETFs right now, even S&P500 is not that diversified anymore. Suggestion check $5MVL

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JaMe@Jehdi

3Settimana

@emppsb I specifically want an EM ETF that is broadly diversified with a high number of holdings — so $5MVL doesn't really fit my investment case 😄

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Uwe Geller@SchlaubiSchlumpf

2Settimana

@emppsb $5MVL isn’t really much more diversified. I am fine with it. It’s only 15% of my portfolio anyways though. For me $5MVL is fine.

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barradas33@emppsb

2Settimana

@SchlaubiSchlumpf yeah I know buddy, that's why I splitted my 8% EM position in two for 5% $EIMI 3% $5MVL so I get the extra performance in the $5MVL while still diversified with the $EIMI

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Uwe Geller@SchlaubiSchlumpf

2Settimana

@emppsb ok I went „full factor risk“ those big tech companies are on top of EM anyways.
And it’s 11%*15% so around 1.7% of my total portfolio. Not much worry.

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NichtRelevant@NichtRelevant

3Settimana

That’s true—it’s actually a problem if you want to invest broadly across emerging markets.

33% spread across just five stocks is pretty lousy, but you could say it’s a design flaw of the MSCI EM—one that, logically, you’ll find in all ETFs that track this index. Personally, I have a savings plan on $HMEF —and, of course, it’s exactly the same there.

Maybe I’ll ditch it soon and replace it with a boring $ALLW. There, I’ll still have the usual suspects in the top 20 positions, but it feels like the portfolio isn’t quite as concentrated in terms of percentage on just a few companies.

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NichtRelevant@NichtRelevant

3Settimana

@NichtRelevant Theoretically, you could also use something like $AWEX (i.e., a global ETF excluding the U.S.). In that case, the top stocks from the MSCI EM would also be represented relatively strongly but wouldn’t be weighted as heavily. At the same time, however, you’d end up with a lot of large European corporations included, which then defeats the purpose of what it’s actually supposed to do.

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GiCi@GiCi

3Settimana

Have a look at equal weighting ETFs.

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jkb92@jkb92

3Settimana

So I actually cut back a bit and put my savings plan on hold. But that was mostly because of the semiconductor stocks—they won't keep performing like this forever.

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Max@MaximumPower93

3Settimana

I totally get where you're coming from, so I've cut back a bit on how much I'm investing in the EM ETF

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Lum0k@Lum0k

That's why I think $LDGL or $TDIV are exciting alternatives in the field of children's technology.

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