Goldman Sachs Heads to Emerging Markets With New ETF

Goldman Sachs Asset Management (GSAM), the asset management unit of Goldman Sachs Group Inc GS, continued its expansion into the world of exchange-traded funds Tuesday with the launch of the firm's first emerging markets offering, the Goldman Sachs ActiveBeta® Emerging Markets Equity ETF GEM.

Second ETF From Goldman

The debut of the Goldman Sachs ActiveBeta® Emerging Markets Equity ETF comes just eight days after Goldman launched its first ETF, the Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF GSLC. The ActiveBeta U.S. Large Cap Equity ETF was the "first in a series of ETFs that will track GSAM’s proprietary ActiveBeta® index, GSLC is designed to offer many of the same benefits of traditional ETFs, with the potential to outperform the market," according to a statement issued by GSAM.

Related Link: Welcome To ETFs, Goldman Sachs

The Goldman Sachs ActiveBeta® Emerging Markets Equity ETF takes the stocks found in the widely followed MSCI Emerging Markets Index and weights them based on based on low volatility, momentum, high quality and good value. That is the same strategy employed by the ActiveBeta® U.S. Large Cap Equity ETF.

ActiveBeta® Indices

"Goldman's ActiveBeta indexes look to identify stocks from companies that may be undervalued by the rest of the market. This can help investors to gain exposure to high potential stocks that others may have overlooked.

"The index identifies stocks from companies that demonstrate sustainable profitability over time. This allows investors to gain exposure to companies with strong fundamentals and potential for consistent returns,” according to GSAM.

A Closer Look At GEM

GEM holds 391 stocks, with 24.6 percent hailing from the financial services sector. The consumer staples and technology sectors combine for another 25.7 percent of the new ETFs weight, according to issuer data.

Asia ex-Japan is the dominant region in GEM, accounting for nearly 70 percent of the new ETF's geographic weight. Emerging Europe along with the Middle East and Latin America combine for the rest of GEM's geographic weight.

GEM follows the precedent set by GSLC of being among the most inexpensive smart beta ETFs on the market today. GEM “is priced competitively at a cost of 45 basis points to investors. The cost of the Goldman Sachs ActiveBeta Emerging Markets Equity ETF is 34 percent lower than the most liquid Emerging Market Equity ETF by volume, and more than 22 percent lower than the Morningstar Diversified Emerging Markets category Strategic Beta average,” according to GSAM.

GSLC, Goldman's first ETF, charges just 0.09 percent per year, or $9 per $10,000 invested, putting that new fund on par with some well-known Vanguard ETFs in terms of annual expenses.

GEM followed GSLC in another way. Like its U.S.-focused counterpart, GEM came to market with a solid commitment from institutional investors, debuting with $20 million in assets under management. GSLC launched with $50 million in assets.