Freedom 100 Emerging Markets ETF

FRDM

市值 US$33億

I'm upgrading the Freedom 100 Emerging Markets ETF (FRDM) to a strong buy and taking a tactical position; EEM keeps its buy rating, as neither deserves a downgrade, but freedom is the worthwhile tilt here. FRDM's portfolio carries a lower trailing P/E, lower price/book, and significantly lower price/sales than EEM's, with nearly half its weight in firms below 15x trailing earnings. FRDM cuts China, India, the Arab Gulf monarchies, and Egypt, allocating that to Poland, Chile, Malaysia, and others, while still sharing TSMC, Samsung, and SK Hynix with EEM.

Freedom 100 Emerging Markets ETF is downgraded from Strong Buy to Buy after an ~85% rally driven by Korean memory and Taiwanese AI hardware exposure. FRDM's portfolio has become highly concentrated, with memory and AI hardware now comprising nearly half, reducing its emerging market diversification appeal. Valuation caution is warranted, but memory fundamentals remain strong through at least mid-2027, supporting continued constructive positioning.

South Korea ETFs are pulling back, but robust exports and rising AI spending could create a compelling long-term buying opportunity.

The Freedom 100 Emerging Markets ETF targets EM equities with high civil, political, and economic freedom scores, avoiding autocracies and state-owned enterprises. FRDM's portfolio is tech-heavy, with 55% concentrated in South Korea and Taiwan, and the top 10 holdings comprising 57% of assets. FRDM offers a 0.49% expense ratio, quarterly distributions, and trades at a 25-30% valuation discount to global markets, but exhibits high volatility and tracking error.

Three funds dominate the emerging markets ex-China conversation right now, and each one has put meaningful daylight between itself and the S&P 500 so far this year.

Investing in emerging markets (EM) used to be synonymous with getting exposure to China. It's an ideal notion, given that it's the second largest economy and thus commands a heavy weight in standard EM benchmarks.

Freedom 100 Emerging Markets ETF (FRDM) employs a semi-quantitative, freedom-weighted selection strategy, resulting in a concentrated active portfolio with 79% active share versus MSCI EM. FRDM has outperformed top passive EM ETFs by at least 1.64x, driven by high exposure to semiconductors and exclusion of China and state-owned enterprises. The ETF's largest holdings are semiconductor stocks, creating both significant upside from sector momentum and heightened risk if the memory supercycle reverses.

The Freedom 100 Emerging Markets ETF leverages 'freedom-weighting' to select and allocate equities from 24 emerging market countries. FRDM excludes state-owned enterprises (over 20% state ownership) and prioritizes personal and economic freedom metrics in its portfolio construction. With $2.97 billion AUM and a 0.49% expense ratio, FRDM has outperformed the market since inception, even during recent U.S. market stagnation.

Emerging market ETFs are back in focus. Two of the ten largest U.S.-listed ETF inflow winners year-to-date are broad EM funds.

The Freedom 100 Emerging Markets ETF's return of 99% over the past five years is 5 times that of the iShares Emerging Markets ETF. Its strategy of excluding countries and companies with high exposure to personal, political, and economic risks gives it a high-quality tilt.