EMDM vs XSOE

EMDMDFirst Trust Bloomberg Emerging Market Democracies ETF

XSOEAWisdomTree Emerging Markets ex-State-Owned Enterprises Fund

In short

EMDM Most emerging-market funds sort companies by size. EMDM screens countries first: only markets clearing an electoral-democracy bar are eligible, and roughly 110 large and mid caps come from the survivors.

XSOE One screen, applied hard: if a government owns more than 20% of a company, XSOE leaves it out. What is left is emerging markets minus the state champions, with country weights pushed back toward the standard EM mix.

Stated mandate

EMDM The Fund seeks to track, before fees and expenses, the price and yield performance of the Bloomberg Emerging Market Democracies Index. It normally invests at least 80% of net assets in securities comprising that Index and uses a replication strategy.

XSOE The fund seeks to track the investment results of emerging-market companies that are not state-owned enterprises, defined as companies with no more than 20% government ownership.

Why people hold it

• EMDM The filter runs at the country level, before any stock selection. Markets that fail the electoral-democracy test are out, so the country map looks nothing like a standard EM index.ftportfolios.com
• Ordinary plumbing under the theme: a 1940 Act ETF that replicates its Bloomberg index with at least 80% of net assets, holds roughly 110 stocks, and pays quarterly.
• The politics are outsourced to a published rulebook, not to a manager's read of the headlines. First Trust has tracked the index since the 2023 launch.

• XSOE The 20% government-ownership cutoff is an index rule, not a manager's judgment call, and the fund has run on it since its 2014 launch.wisdomtree.com
• 0.32% a year, under the typical fund in its emerging-markets peer group, for a screen most broad EM funds never apply.
• After the state-owned names come out, the index pushes country weights back toward where they started, so it stays a filtered EM portfolio rather than a country bet.wisdomtree.com
• A multi-billion-dollar fund spread across roughly 800 stocks, and it has tracked its index closely.

Worth knowing

• EMDM Cost is the sticking point: 0.75% a year, versus a 0.49% median across its emerging-market peer group and single-digit basis points at VEXC (0.07%) or XCEM (0.16%).
• A small, thinly traded fund. Spreads can run wider than in the giant EM trackers, so the order type you use matters more here.
• Screening out non-democracies removes several of the largest markets in the EM universe, so results can diverge widely from a standard emerging-market benchmark in either direction.ftportfolios.com

• XSOE Cheaper broad EM shelf-mates exist (BKEM at 0.11%, XCEM at 0.16%). The screen is what you are paying the difference for.
• Government stakes cluster in banks and energy in EM, so removing them shifts the sector mix toward private-sector names. Expect it to behave differently from a plain EM index.wisdomtree.com
• No country is excluded, so China stays in the mix, unlike ex-China peers VEXC and XCEM. It also sits among the more volatile funds in its peer group.

Full EMDM profile⁠

Full XSOE profile⁠