Vanguard has said it will switch to fully replicating its $2.3bn emerging markets ETF in “light of recent market movements”.
As a result, the Vanguard FTSE Emerging Markets UCITS ETF (VFEM) will see its holding limit increased to 20%.
The changes come following a period of global market volatility after rate hikes in Japan and weak jobs data in the US caused markets to tumble.
Currently, VFEM adheres to the 5/10/40 rule for UCITS which means the maximum weight to a single security can be above 10% only if the top four holdings do not exceed 40%.
However, by becoming fully replicating, VFEM will move to the 20/35 rule, meaning it can take higher concentrations of up to 20% in a single security.
VFEM’s top three holdings are Taiwan Semiconductor Manufacturing (9.7%), Tencent (4%) and Alibaba (2.1%), as at 30 June.
A spokesperson from Vanguard told ETF Stream: "We are increasing the holding limits for the Vanguard FTSE Emerging Markets UCITS ETF, in accordance with the UCITS regulations, in order to ensure we are able to fulfil the fund's investment policy of replicating the FTSE Emerging index.
“As per the shareholder notification, no single constituent of the index amounts to more than 10% of the index.
“However, in light of recent market movements, there is a possibility that one of the index constituents may exceed 10% of the index in the future.”
Elsewhere, Vanguard recently warned investors it could see a restriction imposed by US regulators on its stakes in companies within certain sectors.
