To use Lyxor ETF Asia Pacific Ex Japan listed at SGX (symbol: AEJ) to replace VWO and to represent Emerging Market (EM) asset class.
- This will add Asia Pacific developed market (AU, NZ, SG, HK) into the portfolio and remove non-Asia EM (Latin, Africa, Middle East and Eastern Europe) from the portfolio. I am OK to omit non-Asia EM since they are only 4% of global stock market capitalization and are mainly material stocks.
- The Emerging Market (EM) asset class should be renamed Asia Pacific Ex Japan (APxJP) or may be “The Rest”, but for simplicity sake, the asset class will be called EM as it is.
- The existing VWO holding will be kept as it is.
- The trading volume of AEJ may not be high; need to monitor more closely
By not using VWO that is traded in US stock exchange, I can:
- reduce US estate duty
- reduce the use of foreign brokers
To change the core equity allocation for Japan from 8% to 10%, and the core equity allocation for Emerging Market from 17% to 15%.
In my opinion, the changes are not significant.
- The overall portfolio allocation for Japan will change from 4.8% to 6%
- The overall portfolio allocation for Emerging Market will change from 10.2% to 9%
To ease portfolio management as the new numbers are easier to manage and remember.