Invest in Emerging Markets — While Being True to Your Values

A new exchange traded fund screens emerging markets for indications of civil society

I like the idea of investing in emerging markets (“EM”) for two reasons. First, to provide diversification. EM is the third pillar in a diversified equities portfolio (the other two being US and non-US developed markets).

The second reason for my interest in emerging markets is because of the potential to improve the lives of billions of people in developing countries. For example, looking at South Korea today it is hard to believe that in the 1960s it was a war-shattered rural economy. Now South Korea enjoys one of the highest standards of living in the world — propelled by a vigorous modern economy and strong civil institutions.

For many investors, the easiest way to invest in emerging markets is via an exchange traded fund (“ETF”). Many ETF focus on EM. The biggest is the Vanguard FTSE Emerging Markets ETF, (Code: VWO) which has over $50 billion assets under management. It has low management fees (0.10%) and is highly liquid, averaging almost $1 billion daily turnover. This makes for a very low average bid/offer spread (0.03%).

So what’s not to like? Well, a look at its investments by country shows nearly 34% of assets are…