Emerging Markets ETFs ex Russia

Hi

I closed all my EM positions today (2 closures pending opening of NYSE Arca).

Question is now how to replace them. Options I considered are:

  • Just increase other weights e.g. Developed Markets, US, CH, maybe something else.
  • Buy a few replacement ETFs for EM e.g. China, Asia (making sure no Russia included), South/Central America, etc.
  • Buy some Emerging Market ex Russia replacement

I’ll dig into the topic for a while now and maybe some people consider doing something similar so I thought I’ll open a thread to discuss options.

Looking for both US and IE domiciled options.

Yes, I was also thinking about replacing MSCI Emerging Markets with funds on individual countries. Main ones are China, South Korea, India. There are also regional funds like Emerging Asia or Latin America available. Awkward but possible.

Does it exists? Russian market is was few % of emerging markets anyway, so I don’t think it’s worth bothering.

I also really want to disinvest myself from russia because of their tyranny but I checked my portfolio analyzer on IBKR and I’m only invested 0.7% of my total portfolio in Russia. My conclusion is that it is not worth to rebalance since there is no EM ex Russia ETF AFAIK.

If there is a EM ex Russia or All-World ex Russia without extremely higher TER I would gladly switch too.

Asian emerging markets funds are available and they cover a large part of EM. The question is rather: do you really want to desinvest Russia and leave China?

An emerging market ex Russia ETF doesn’t seem to be available. I found only Eastern Europe ex Russia but that’s not what I’m looking for. I really want to remove Russia as a matter of principle even if the allocation is very low, but I can’t invest a single dollar into that country (many people investing a few dollars in the end is also lots of dollars).

It looks like with an EM Asia & Lat Am & South Africa ETF I can basically mimic more or less the same allocations I had before. Maybe I’ll miss a few things that were very small but that’s okay.

The most important one will be the EM Asia.

Something like iShares MSCI Emerging Markets Asia ETF but hopefully there will be something with lower TER.

Then a small Lat Am position and maybe South Africa but since South Africa would be such a small position I might even drop it.

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You could short a Russian ETF to offset what you have.
I guess the best place to find ex-Russia ETFs is… Russia. (c.f ex-CH ETFs, who would want/need them except Swiss entities)

There’s FRDM…contains only stocks from countries that fulfill certain criteria (“The index seeks to invest in countries with higher human and economic freedom scores.”)
Mind, Russia is not the only one being excluded!

More info: FRDM – Freedom ETFs

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This is a good question. China continuously supports Russia on the ongoing matter so it may be suitable to exclude China as well. But I’m not sure about it. I don’t want to exclude every country from my investments who does or did something wrong, but in the case of Russia, I’m personally affected, so I need to take action within my possibilities.

I had an 11% EM allocation, without China it will be 7-8% left. So maybe it may not even be worth to look for a replacement in this case.

This is a good idea but more equalise money on the book. Hmm.

Interesting idea. But as far as I know it’s automated and it could later on include countries I wanted to blacklist. And the fund is limited to 100 positions … I will have a closer look into it.

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FWIW, it might be removed for everyone: EXCLUSIVE MSCI says removing Russia from indexes "natural next step" | Reuters

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That would be awesome!

Here it is:

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The only problem is they remove Russia because the market accessibility requirement is not met and Russian assets are uninvestable for the time being. Once sanctions are softened they might become investable again and then they most likely will include it again. I want Russia to be gone for good in my portfolio.

They also write:

MSCI already calculates more than 100 global and regional indexes that exclude Russia, for example, MSCI Emerging Markets ex Russia, MSCI ACWI ex Russia, MSCI EM EMEA ex Russia, MSCI EM Eastern Europe ex Russia, etc. The full list of MSCI ex Russia Indexes is available on request.

So I hope there will be corresponding ETFs available e.g. for MSCI Emerging Markets ex Russia. Currently this isn’t the case. But I wouldn’t feel comfortable with just a temporary suspension.

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There is Eastern Europe ex Russia that tracks like 0.1% of global stocks market. Enjoy!

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I know, but why would I want that?

I hope you’ve seen this in the meantime: https://www.msci.com/eqb/pressreleases/archive/PR_Russia_Classification.pdf

IEMG had Russian stocks in the mix according to the PDF factsheet. But the Website currently doesn’t mention Russia in the list of geographic exposure.

Before you ask: I am holding IEMG because I wanted to have South Korea in it although it is a controversial subject whether South Korea is an emerging market or not

Yes, I saw it. I currently divested from emerging markets because I want this to be permanent and not because Russian stocks are currently not investable. So I still need to evaluate what the options are to invest in emerging markets with as less ETFs as possible and as low costs as possible with a guarantee that there will be no Russian stocks.

If there will be permanent indices without Russian stocks it would solve my problem but as far as I understood MSCI their reasons for removing them is only because they are uninvestable at the moment and not as a form of sanctions.

I see no realistic scenario with Russia becoming investable again under the current government

I understand this but unfortunately it’s not a solution to what you want to achieve, since if restrictions were to say lifted, you would still be buying ETFs of companies that have business with Russia and you would be indirectly supporting that. The entire ecosystem is connected and an EX-Russia ETF strategy won’t help. What helps are the measures taken today by all countries & companies.

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