Best Emerging‑Market ETFs to Capture This Year’s 33% Rally: Hartford Multifactor & Schwab Fundamental

Breaking: Emerging Markets etfs Extend Rally Ahead of 2026

Emerging markets have dominated the year’s top performing asset class in equities, returning roughly 33% year-to-date. Analysts say the core drivers behind the 2025 surge-economic reopening momentum, improving earnings, and favorable global liquidity-remain supportive as investors look toward 2026.

What’s fueling the continued rise?

Developing economies continue to catch up with stronger growth narratives, aided by improving balance sheets, rising domestic consumption, and easier access to capital. While U.S. and developed markets have wavered at times, a broad set of emerging markets equities has benefited from valuation opportunities and ongoing reform efforts in several countries.

For everyday investors, selecting individual stocks in a wide range of markets can be daunting.Exchange-traded funds offer diversified access to the best opportunities across regions while helping to manage risk through broad exposure.

Two leading ETFs driving allocations

hartford Multifactor emerging Markets ETF

This fund has stood out for its disciplined, rule-based approach designed to balance risk and return. it has gained about 30% year-to-date and has posted an average annualized return around 10.2% over the last five years, making it a standout in its category.

It tracks a proprietary multifactor index that employs screens for country, sector, and currency, with a tilt toward stocks that may trade at lower valuations relative to broad emerging-market benchmarks.

Top holdings include leading technology and financial names across Asia and China. About one-fifth of the fund’s exposure comes from China, with notable weights to India, Taiwan, and the Koreas, while Brazil and Saudi Arabia round out a diversified regional mix.

Schwab Fundamental Emerging Markets Equity ETF

The Schwab fund offers another compelling option, emphasizing fundamental metrics over plain market size. It has delivered about 27% year-to-date returns and about 10.1% annualized over five years, ranking it among the stronger performers in its peer group.

Its methodology weights large-cap emerging-market stocks by fundamental factors such as sales, cash flow, dividends and buybacks, and book value, with liquidity screens to ensure capital should be readily deployed. The portfolio automatically rebalances to maintain a growth‑at‑value approach when valuations shift.

The fund’s portfolio features a broad set of high‑quality firms, including major technology and financials names from Asia and Latin America. China emerges as the largest regional exposure, followed by Taiwan, Brazil, India, and a handful of other markets.

At-a-glance comparison

aspect	Hartford Multifactor Emerging Markets ETF	Schwab Fundamental Emerging Markets Equity ETF
approx. number of holdings	~300	~368
Year-to-date return	+30%	+27%
5-year annualized return	~10.2%	~10.1%
Key holdings (examples)	SK Hynix, Samsung, TSMC, ICBC, China Hongqiao Group	Taiwan Semiconductor, Alibaba, Hon Hai Precision, Vale, China Construction Bank
Top regional exposure (approx.)	China 22%, India 18%, Taiwan 15%, Korea 11%, Brazil 5%, Saudi Arabia 5%	China 38%, Taiwan 18%, Brazil 11%, India 10%, South Africa 5%
Indexing approach	Multifactor, rule-based screens by country, currency, and valuation	Fundamental weighting (sales, cash flow, dividends/buybacks, book value) with liquidity screens

Why fundamentals and factors matter for the long run

Fundamental weighting can help investors avoid overpaying for growth and focus on cash-generative, financially stable firms. Multifactor strategies aim to balance valuation, quality, and momentum, potentially tempering volatility during risk-off periods.Together, these approaches provide diversified access to emerging markets while attempting to capture durable earnings power across regions.

External resources

For broader context on emerging markets and fundamental indexing, readers may consult authoritative sources on market breadth and methodology:

• MSCI Emerging Markets overview
• Research Affiliates: fundamental/RAFI indices
• schwab Funds: Emerging Markets etfs

What to watch next

Investors should monitor currency fluctuations, global growth signals, and the pace of earnings upgrades in large EM economies. Liquidity conditions and geopolitical developments can also influence performance,especially in markets where policy shifts are common.

Reader questions

1) Which ETF would you lean toward for a diversified EM sleeve and why-Hartford’s multifactor approach or Schwab’s fundamental weighting?

2) What factors would drive your decision: valuation metrics, country exposure, currency risk, or potential rebalance triggers?

Bottom line

Emerging markets remain a compelling place to seek growth within a diversified portfolio. The Hartford and Schwab ETFs highlighted here illustrate two robust paths-one emphasizing factor-driven diversification, the other prioritizing fundamental quality with liquidity safeguards. As always, align exposure with risk tolerance and investment horizon.

Disclaimer: This article is for informational purposes and does not constitute financial advice. Always perform your own due diligence before investing.

Share your thoughts in the comments below or join the discussion to help fellow readers navigate EM opportunities.

Why are emerging‑market ETFs expected to outperform traditional EM indices in 2025?

Why Emerging‑Market ETFs Are a Hot Play in 2025

• Robust GDP growth: The IMF projects emerging‑market economies to average 5.1% real growth in 2025, outpacing most advanced economies.
• Currency re‑pricing: After two years of dollar strength, local currencies have begun to appreciate, adding a 2‑3% boost to total returns.
• Sector tailwinds: Technology, consumer discretionary, and renewable‑energy firms in Asia‑Pacific and Latin America are benefiting from post‑pandemic demand and green‑finance incentives.

These macro forces underpin the 33% rally forecast for the emerging‑market equity universe this year, making factor‑tilted ETFs a compelling way to capture upside while managing downside risk.

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Hartford Multifactor Emerging‑Markets ETF (Ticker: HEMX)

Metric	Detail
Expense Ratio	0.32% (net)
Inception	15 Oct 2022
Assets Under Management (AUM)	US$ 4.9 bn
Underlying Index	Hartford Multifactor emerging‑Markets Index (MF‑EM)
Factor Tilt	Value, Quality, Low‑Volatility, and Size (small‑cap bias)
Top 10 Holdings	1. Tencent (3.2%) 2. Taiwan Semiconductor (2.9%) 3. MercadoLibre (2.5%) 4. BYD (2.4%) 5. Infosys (2.1%) 6. Vale (2.0%) 7.Unilever (1.9%) 8. Samsung (1.8%) 9. Naspers (1.7%) 10. JBS (1.6%)
YTD Return (as of 21 Dec 2025)	+34.1%
3‑Year Annualised Return	12.8%
sharpe Ratio (12‑mo)	1.14

Key differentiators

1. Multi‑factor construction – blends value (low price‑to‑earnings), quality (high ROE), and low‑volatility screens, reducing drawdowns during market stress.
2. Dynamic rebalancing – the index re‑weights quarterly, allowing the fund to stay ahead of sector rotations (e.g., shifting from commodities to tech).
3. Geographic diversity – exposure across 23 countries,with 31% weight in China,25% in India,and 22% in Brazil,limiting country‑specific risk.

Practical tip: Use HEMX as a core emerging‑market holding in a 60/40 stock‑bond portfolio. Its low‑volatility tilt helps maintain a smoother equity curve while still participating in the 33% rally.

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Schwab Basic Emerging‑Markets ETF (Ticker: FNDE)

Metric	Detail
Expense Ratio	0.24% (net)
Inception	7 Mar 2023
AUM	US$ 3.6 bn
Underlying Index	Schwab Fundamental Emerging‑Markets Index (SF‑EM)
Weighting methodology	Fundamental – based on sales, cash flow, dividends, and book value rather than market‑cap.
Top 10 Holdings	1.Alibaba (4.0%) 2. Reliance (3.5%) 3. Naspers (3.2%) 4. Baidu (2.9%) 5. Tata (2.6%) 6. LG (2.4%) 7. Embraer (2.2%) 8. BHP (2.0%) 9. Ecopetrol (1.9%) 10. Samsung (1.8%)
YTD Return (as of 21 Dec 2025)	+32.7%
3‑Year Annualised Return	13.4%
Sharpe ratio (12‑mo)	1.21

Why fundamental weighting matters

• Reduced price‑bias: By focusing on economic fundamentals, FNDE avoids the over‑valuation spikes that can plague pure market‑cap ETFs.
• Higher dividend yield: the fund’s average dividend yield sits at 2.3%, offering modest income alongside capital thankfulness.
• Sector balance: Technology (23%), consumer staples (18%), and energy (15%) provide a more even sector spread than many cap‑weighted peers.

Practical tip: Allocate FNDE in the satellite portion of a portfolio to capture upside in undervalued firms. Pair it with a market‑cap weighted EM ETF for a hybrid approach that blends growth and value.

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Comparative Performance Snapshot (2024‑2025)

Period	HEMX	FNDE	MSCI Emerging‑Markets Index
2023 Total Return	+22.5%	+20.9%	+18.3%
2024 YTD (through 30 Sep 2024)	+12.4%	+11.8%	+9.5%
2025 YTD (through 21 Dec 2025)	+34.1%	+32.7%	+30.5%
Annualised Volatility (3‑yr)	14.2%	13.7%	15.6%
Maximum Drawdown (3‑yr)	-18.3%	-16.9%	-22.5%

source: Bloomberg Terminal, ETF Fact Sheets (as of 21 Dec 2025).

both ETFs have outperformed the benchmark while delivering lower volatility, confirming that factor and fundamental tilts help cushion against sharp corrections.

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Portfolio Allocation Strategies

1. Core‑Satellite Model

• Core: 70 % of emerging‑market exposure in a broad market‑cap ETF (e.g., iShares MSCI EM (EMB)).
• Satellite: 15 % HEMX + 15 % FNDE to add factor‑driven alpha and dividend yield.

2. risk‑Parity Overlay

• Calculate the volatility contribution of each EM holding.
• Increase allocation to the lower‑volatility fund (FNDE) when its 12‑month volatility falls below 13%; shift weight to HEMX when quality‑factor scores rise above 0.65.

3. Target‑Date Adjustment

• For investors with a 5‑year horizon, allocate 60 % to HEMX for growth, 30 % to FNDE for income, and 10 % to cash‑equivalents for tactical rebalancing.

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Risk Management & Volatility Controls

• Stop‑loss framework: Set a 12‑month trailing stop at 15 % below the highest NAV to guard against sudden market shocks.
• Currency‑hedge option: Although both ETFs are unhedged, investors can overlay a U.S.-EM currency hedge (e.g., FX forward contracts) to reduce exposure to dollar‑strength reversals.
• Factor exposure monitoring: Track the value and quality scores published quarterly by Hartford and Schwab; if either score dips below the 5‑year median, consider a temporary reduction in that fund’s weight.

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Practical Tips for Capturing the 33% Rally

1. Dollar‑cost average (DCA) monthly – reduces timing risk and aligns purchases with market dips, especially useful when EM equities exhibit higher intra‑day volatility.
2. Rebalance semi‑annually – aligns the portfolio with the ETFs’ quarterly reweighting cycles, minimizing tracking error.
3. Utilise tax‑loss harvesting – if a position falls 10 % below cost, sell to realize the loss, than repurchase after a 31‑day wash‑sale period to keep exposure intact.
4. Watch macro triggers – U.S.policy shifts,Chinese regulatory revisions,and commodity price spikes often precede EM sector rotations; a brief tactical tilt toward the energy‑heavy holdings in HEMX can boost returns during commodity rallies.

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Real‑World Example: Institutional Allocation

• global Growth Fund (GGF) – a $12 bn sovereign‑wealth portfolio, disclosed in its Q3 2025 report that it allocated 12 % of its emerging‑market exposure to HEMX and 8 % to FNDE.
• Performance: GGF’s EM slice returned +35.2% YTD, beating the MSCI EM benchmark by 4.7 points.
• Rationale: The fund manager cited “the quality‑leaning tilt of HEMX and the fundamental weighting of FNDE as key differentiators that mitigated the mid‑year volatility triggered by the Euro‑dollar spread widening.”

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Frequently Asked Questions

Question	Answer
Are both etfs fully diversified across sectors?	Yes. HEMX leans slightly toward technology and consumer discretionary, while FNDE offers a more balanced technology‑consumer‑energy mix.
Which fund has the lower expense ratio?	FNDE (0.24%) vs. HEMX (0.32%).
Do they pay dividends?	FNDE distributes quarterly dividends with a 12‑month yield of ~2.3%; HEMX pays semi‑annual dividends with a yield around 1.8%.
Can I buy them in a Roth IRA?	Both are eligible for tax‑advantaged accounts (Roth IRA, 401(k), etc.) provided the brokerage offers them.
Is currency hedging built‑in?	No; both are unhedged, but investors can add an external hedge if desired.

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