A sound investment process and strong management team underpin SPDR® Portfolio Emerging Markets ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and an overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. SPDR® Portfolio Emerging Markets ETF earns a High Process Pillar rating. The main driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Noteworthy risk-adjusted performance also bolsters the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. The parent firm's five-year risk-adjusted success ratio of 58% contributes to the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their respectable success ratio suggests that this firm does well for investors and that this fund may benefit from that.

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Emerging BMI Index.  The fund generally invests substantially all, but at least 80%, and of its total assets in the securities comprising the index and in depositary receipts based on securities comprising the index. The index is a float-adjusted market capitalization weighted index designed to define and measure the investable universe of publicly traded companies domiciled in emerging markets. 

 The portfolio has allocations in its top two sectors, industrials and basic materials, that are similar to the category. The sectors with low exposure compared to category peers are technology and consumer defensive, with technology underweighting the average portfolio by 5.8 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 3,506 holdings and is less top-heavy than peers. Specifically, 17.8% of the fund’s assets are concentrated within the top 10 fund holdings, compared to the category’s 25.3% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 6% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

SPDR® Portfolio Emerging Markets ETF's strong equity team drives the strategy's Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Dwayne Hancock. Experience on the team is abundant, with over 25 years of average portfolio management experience. Together, they manage a total of three strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR Portfolio Emerging Markets ETF

SPEM tracks an index of emerging markets companies weighted by market cap.

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Emerging markets continued to expand at a solid pace midway into the first quarter of 2024, supported by broad-based expansion across both manufacturing and service sectors.

Emerging Markets Growth Remains Solid Amid Intensifying Inflationary Pressures

I analyze the characteristics of the SPEM ETF, which focuses on emerging markets. The overexposure to China has impacted the ETF's performance, but its position in the Indian market seems promising. SPEM has good sector diversification, outperforms the category average in terms of risk performance, and has strong liquidity and low expenses.

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Emerging markets have taken solace in the view that the U.S. hiking cycle is over, helping deliver strong returns in 2023. Slowing global inflation has been due to sharply lower core goods inflation, while service prices have remained stickier.

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By Ed Agostino After the great financial crisis, China's appetite for commodities and technology fueled a global economic recovery. The rest of the world recovered and then grew, largely on the back of China's incredible transformation.

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Emerging markets will also be looking closely at economic conditions in mainland China, which will be a key determinant of broader emerging market growth in 2024. A key reason for diverging emerging and developed market performance was the marked variation in demand conditions.

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SPDR Portfolio Emerging Markets ETF has fallen considerably since 2021, losing over 30% of its value. Despite attractive valuation based on the Buffett Indicator, investors should exercise caution due to high exposure to China. The Federal Reserve's monetary policy has a large impact on SPEM's performance, and there is no near-term catalyst for outperformance.

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As China stocks continue to fall, investors may want to ensure their emerging markets exposure diversifies away from the country. China stocks have been pressured by a weakening yuan and waning investor optimism toward the world's second-largest economy.

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Shares outstanding in 'EEM' have been unchanged for months.

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News for SPDR Portfolio Emerging Markets ETF ETF (SPEM)