ETF Showdown: Crouching Tigers, Hidden ETFs

Emerging markets ETFs have come roaring back with a vengeance in recent weeks and we're getting close to the time on the calendar when in 2010 many of these funds started to make significant moves to the upside. Of course, only time will tell if we see a sequel to that trend, but it is clear that as emerging markets ETFs are re-embraced, funds tracking Asian tiger economies are bound to flourish and that scenario makes for a compelling ETF Showdown today. We're pitting the iShares S&P Asia 50 Index Fund AIA against the newly minted Global X FTSE ASEAN 40 ETF ASEA. In some respects, this is a tricky comparison because AIA is almost four-years old while ASEA isn't even three months old, but both funds offer multi-country exposure to Asian economies and both may just have a place in your portfolio. AIA is the play for the conservative investor looking for emerging markets exposure. At almost 30% of AIA's weight, South Korea is tops in terms of country weight, and that's a positive not only because the economy there is sound, but also because South Korea is just the type of EM economy a conservative investor can be at ease with. China, Taiwan and Hong Kong combine for more than 61% of AIA's weight, so while this ETF isn't like playing Australia, Canada or another developed market, it is not as risky as some other EM ETFs. On the other hand, ASEA is a mix of conservative and more speculative emerging markets. The ASEAN countries as a group are far more speculative than even China, but with Singapore (41.2%) and Malaysia (32.8%) dominating this ETF, we're not going too far of the EM beaten here, if at all. The advantage of ASEA is that high-fliers Indonesia and Thailand combine for over 25% of the ETFs weight. For the investor that doesn't want to own those country-specific ETFs, but still wants exposure to those markets, ASEA becomes a sound bet. Volume and assets under management comparisons are not fair in this scenario because of ASEA's youth, but the fund has an expense ratio of 0.65%, well above the 0.5% offered by AIA. We're not going to let the fees be the deciding factor here. In fact, we'd overlook the fees in favor of concentrating on AIA's heavy exposure to Chinese-large caps, which have been a bit of problem even as other EM ETFs have rebounded. And on the basis of returns, ASEA has blown AIA out of the water since its debut. Still, we'll opt for a draw here with the notion that AIA and ASEA can be held at the same time within the same portfolio, allowing an investor to have most of his or her Asian bases covered.