Strong returns and supercharged investor demand drive Europe’s EMQQ past $100m milestone

Strong returns and supercharged investor demand drive Europe’s EMQQ past $100m milestone

Jul 2nd, 2020 | By James Lord, CFA | Category: Latest news

The Ireland-domiciled EMQQ Emerging Markets and Ecommerce UCITS ETF (EMQQ LN) has surpassed $100 million in assets under management courtesy of sector-leading portfolio performance and supercharged investor demand.

Kevin Carter, Founder and CEO of Big Tree Capital

Kevin Carter, Founder and CEO of Big Tree Capital.

The ETF was devised by US-based Big Tree Capital and brought to market in Europe through a partnership with London-based white-label ETP platform HANetf .

It is effectively a European listed and UCITS compliant equivalent of its namesake in the US, the EMQQ Emerging Markets Internet & Ecommerce ETF (EMQQ US) .

The fund debuted in Europe on 2 October 2018 with $2m in seed capital. As of close of market 30 June 2020, assets under management stood at $106m, up $97m from the start of the year. In the second quarter of this year, the fund pulled in around $78m in net new assets.

Meanwhile, fund performance is up 32.7% this year (as of 30 June 2020), making the strategy the best-performing emerging markets ETF year-to-date by some margin.

The fund provides targeted exposure to internet and ecommerce companies operating in emerging and frontier markets and has been designed to capture both the emerging markets consumer growth story – what McKinsey & Company calls ‘the biggest growth opportunity in the history of capitalism’ – and the increasing digitalization of economies.

It is listed on London Stock Exchange , Xetra , SIX Swiss Exchange and Borsa Italiana and comes with an expense ratio of 0.86%.

The US fund, which listed on NYSE Arca back in 2014, now houses over $700m AUM. It claims the number one spot in EM not just year-to-date and over one-year, but also over three-year and five-year holding periods.

Commenting on the milestone, Kevin Carter, Founder and CEO of Big Tree Capital, commented, “We’re delighted to see the success that EMQQ has had in Europe which validated our strategy of diversifying our distribution beyond North America.

“EMQQ has resonated as the story is simple – as emerging market consumers become wealthier they will do more, buy more, and work more via their mobile phones and tablets. EMQQ taps into the heart of this massive change that is affecting more than half of the world’s population.”

Carter added, “The performance of the emerging markets internet and ecommerce space in 2020 has been a bright spot not just in emerging market investing but in looking across global markets as well, and has been achieved despite the ongoing Covid-19 pandemic, seemingly never-ending trade tensions, and delisting threats in the US.

“Covid-19 seems to have acted as an accelerator for smartphone ecommerce in emerging markets. This, coupled with what we believe to be strong fundamentals and attractive valuations, could continue to offer further potential growth for emerging markets internet and ecommerce companies going forward.”

According to Carter, the potential for future online consumer growth may be especially significant in Latin America where Covid-19 could have the same effect on the region’s ecommerce sector that SARs did on China’s in the early 2000s. Online retail sales currently account for just 5% of total sales in Latin America; however, this figure is expected to surge to 25% over the next ten years.

Spearheading EMQQ’s strong performance has been Argentina-based e-commerce giant Mercadolibre, which posted a 45% return for the month of May alone. Due to the stock’s impressive advance, Mercadolibre has risen to be the largest holding in EMQQ.

Carter noted, “Mercadolibre represents how the macro conditions that continue to drive China’s digitization are also being felt throughout developing economies, but offering the possibility of even greater upside as they come off a much lower base and much earlier in their digitization cycle. In Latin America, only 34% of consumers under the age of 15 buy goods online, compared to 74% in the UK and just over 60% in China. This adoption gap is closing fast, however, as the virus has created an extra incentive and catalyzed growth.”

Carter recently shared his perspectives on the fund with an audience of investors in a webcast entitled ‘The Digital Economy in Emerging Markets‘ (28 May 2020) hosted by ETF Strategy .