Capitalizing on BRICS Expansion: Three ETF Strategies for Emerging Market Investors

The recent expansion of the BRICS economic bloc has created substantial investment opportunities. Following the addition of Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates to the original five members—Brazil, Russia, India, China, and South Africa—the newly formed BRICS-11 now commands roughly 36% of global GDP and represents 47% of the world’s population. This geopolitical shift has prompted investors to seek diversified exposure to these emerging economies through exchange-traded funds (ETFs).

Understanding the BRICS-11 Investment Landscape

The BRICS expansion represents a significant consolidation of economic power among developing nations. With six new members chosen from 22 applicants, the bloc now encompasses markets that were previously more fragmented. For investors seeking to gain exposure without concentrating bets on any single nation, ETFs offer a practical vehicle. Here are three funds meeting rigorous criteria—minimum $250 million in net assets, median market cap of $1 billion, and dividend yields of at least 1.5%—that provide meaningful access to these economies.

iShares MSCI Emerging Markets Ex China ETF (EMXC): The Broad Emerging Markets Play

Leading the pack in terms of scale, the iShares MSCI Emerging Markets Ex China ETF (ticker: EMXC) commands $5.2 billion in assets since its July 2017 launch. This passive vehicle tracks the MSCI Emerging Markets Ex China Index, capturing mid-cap and large-cap equities across 23 emerging economies while deliberately excluding the world’s second-largest economy.

The fund’s geographic weight reflects BRICS representation prominently. India dominates at 21.50%, followed by Taiwan (21.04%) and South Korea (17.95%). Among current and future BRICS members, India, Brazil, and South Africa carry meaningful positions, with Saudi Arabia and the UAE also present in the expanded BRICS-11 framework.

Sector positioning reveals a technology-heavy orientation (26.79% weighting), complemented by financials (24.71%) and materials (10.12%). The portfolio spans 705 total holdings, with the top 10 positions accounting for 23.58% of assets. Average market capitalization stands at $30.2 billion. Since inception, a $10,000 investment has grown to $11,779 as of early September, while the current dividend yield reaches 2.3%.

WisdomTree Emerging Markets State-Owned Enterprises Fund (XSOE): The Private Sector Alternative

Taking a different approach, the WisdomTree Emerging Markets State-Owned Enterprises Fund (XSOE) explicitly targets private companies within emerging markets, excluding entities with state ownership exceeding 20%. Established in August 2014, this fund tracks a specialized index designed to capture privately-run enterprises.

With $2.2 billion in net assets distributed across 586 holdings, XSOE manages a portfolio with collective market capitalization of $8.18 trillion. Large-cap stocks ($10 billion+) comprise nearly 69% of holdings, with mid-caps and smaller players filling the remainder. The portfolio’s valuation metrics reveal average price-to-earnings and price-to-sales ratios of 18.45x and 1.35x respectively.

Geographic exposure concentrates in China (25.22%), India (19.31%), and Taiwan (16.94%)—reflecting BRICS representation through China and India. Technology leads sector allocation at 23.16%, followed by consumer discretionary (19.81%) and financials (15.57%). Since December 2014, the fund has delivered annualized returns of 3.4% through mid-2023, with a 2.6% dividend yield currently.

SPDR S&P China ETF (GXC): Pure-Play China Exposure

The smallest of these three by assets, SPDR S&P China ETF (GXC) offers concentrated exposure to Chinese equities accessible to foreign investors. Operating since March 2007 as the oldest fund in this trio, GXC tracks the S&P China BMI Index with $857.4 million in current assets.

The fund’s historical performance illustrates both volatility and growth potential. An initial $10,000 investment from inception has appreciated to $13,302 as of September, though the fund peaked above $22,000 during mid-2020—highlighting both the opportunities and risks of China-specific investing.

GXC’s composition is nearly entirely dominated by Chinese securities (99.67% of net assets), making it unsuitable for investors seeking diversification across the broader BRICS-11. The top 10 positions represent 34.3% of the portfolio, with Tencent Holdings (TCEHY) and Alibaba (BABA) combining to exceed half of this concentrated exposure.

Consumer discretionary (27.25%) and communication services (16.93%) lead sector weights, alongside financials (15.22%). Despite the index containing 2,044 total holdings, the fund employs sampling methodology and holds 945 securities. Weighted average market capitalization reaches $88.5 billion, reflecting large-cap orientation. Valuation metrics show price-to-book (1.24x) and P/E ratios (10.10x) suggesting relative value, while dividend yield stands at 2.93%.

Comparative Analysis and Strategy

These three funds offer distinct approaches to BRICS-11 participation. EMXC provides broad diversification across multiple emerging markets with substantial BRICS representation. XSOE adds a private-sector filter, potentially capturing higher-growth opportunities outside state-controlled enterprises. GXC delivers focused China exposure, capturing the bloc’s largest economy but with concentrated risk.

For investors seeking maximum BRICS-11 exposure with diversification, EMXC represents the foundational holding. Those preferring private enterprise dynamics may favor XSOE’s approach, while GXC suits investors with conviction specifically around China’s economic trajectory within the expanded BRICS framework.