Emerging Markets (AMEX: GMM)
The SPDR S&P Emerging Markets Fund (AMEX: GMM) will go head-to-head with the dominant EEM fund from BGI. The two funds have two major differences.
Most immediately, there is a difference in expense ratio: 0.60 percent for GMM versus 0.75 percent for EEM.
A more important difference, however, is how the funds handle South Korea. BGI’s fund tracks an index from MSCI, which considers South Korea an emerging market; as a result, South Korea is the largest country holding in EEM, making up 15.18 percent of the fund as of December 31, 2006. In contrast, the SPDR fund, GMM, tracks an index that considers South Korea a developed market; as a result, GMM has zero South Korea exposure.
With South Korea’s high-tech economy, this difference trickles down into everything from sector weightings to price-to-earnings ratios. EEM, for instance, has nearly 15 percent exposure to Information Technology, compared to just 7.75 percent for GMM.
