XSOE Review: Is it a Good Emerging Markets ESG ETF?

If you want to invest in emerging markets but are worried about weak governance, the WisdomTree Emerging Markets ex-State-Owned Enterprises ETF (XSOE) lets you avoid the stocks of state-owned enterprises and their political risks. But is it a good investment otherwise?

SustainFi   Updated November 4th, 2021

Some of our posts may contain links from our affiliate partners. However, this does not influence our opinions or ratings. Please read our Terms and Conditions for more information.

What is the XSOE?

  • Date launched: December 2014
  • Assets under management: $4.18 billion
  • Expense ratio: 0.32%
  • Minimum investment: none

Launched in 2014, the WisdomTree Emerging Markets ex-State-Owned Enterprises ETF (XSOE) invests in emerging markets stocks that are not state-owned enterprises (SOEs). SOEs are defined as companies with government ownership of more than 20%.

The fund tracks an index of stocks in 17 emerging markets, including China. WisdomTree’s research team identifies state-owned companies, including those owned through a sovereign wealth fund, a local government, or a government agency. In practice, the team excludes about 220 stocks out of a universe of 800.

Why avoid investing in state-owned enterprises?

Most investors want to be in emerging markets for their remarkable growth prospects. But, SOEs are potentially influenced by political decisions, which can dampen earnings growth and reduce shareholder returns. Indeed, shareholders can be a relatively unimportant constituency. And SOEs can be inefficient and corrupt.

A WisdomTree analysis shows that non-SOE companies have done materially better than SOE emerging market stocks since 2007.

Besides, on a personal level, you may disagree with the political decisions made in Russia or China.

XSOE Holdings

SOEs are more common in sectors like natural resources and banking, and countries like China and Russia have more SOEs than other emerging markets. So XSOE owns less of these sectors and countries than a regular emerging markets fund. As a result, XSOE excludes major firms like China Construction Bank, China Mobile, and the Russian gas giant Gazprom.

The top five countries are China, India, Taiwan, South Korea, and Russia.

And here are the top ten holdings:

Holdings% of Portfolio
Taiwan Semiconductor5.9%
Tencent Holdings4.7%
Samsung Electronics4.6%
Alibaba Group3.6%
Meituan Dianping1.8%
Reliance Industries1.6%
Infosys Ltd1.3%
Housing Development Finance1.2%

Data as of 10/31/2021

XSOE Expense Ratio

XSOE costs 0.32% annually, or $32 on a $10,000 investment.

In comparison, the iShares MSCI Emerging Markets ETF (EEM) costs 0.70%. However, the Vanguard FTSE Emerging Markets ETF (VWO) costs only 0.10%.

Make an impact with your money

Best robo-advisor for green investing





Get a green credit card





Build custom portfolios for free



$125 for M1 Plus



Save and invest spare change


$3-$5 / month



Work with human advisors





XSOE Performance

There does seem to be some evidence that XSOE has outperformed in the past, though past performance doesn’t guarantee future performance:

  • XSOE returned 11.5% annually over the past three and five years and 12.4% over the past year
  • XSOE beat the MSCI Emerging Markets Index, which does not exclude SOEs, by 4% and 2.7% over the past three and five years, though it did worse over the past year


The Vanguard Emerging Markets Stock Index Fund ETF (VWO) is a very popular emerging markets index fund from Vanguard; it is also available as an ETF. See how the two compare:

FundExpense RatioAssetsHoldingsCountriesSectors3-year return5-year return 
WisdomTree Emerging Markets ex-SOE ETF (XSOE)0.32%$4 bn503China (31%), India (17%), Taiwan (16%)Tech (23%), Consumer (18%), Financials (14%)11.5%11.5%
Vanguard FTSE Emerging Markets ETF (VWO)0.10%$81 bn5229China (36%), Taiwan (18%), India (15%)Financials (19%), Consumer (14%), Tech (17%)9.7%8.7%

Source: WisdomTree, Vanguard. Data as of 10/31/2021

So, even though XSOE is more expensive, it has done materially better than VWO over the past three and five years. XSOE owns only 10% of the number of stocks that VWO owns, so you should expect their performance to differ a lot.


Not exactly, XSOE targets the G in environmental, social, and governance by removing SOEs, which are perceived to have worse governance. However, it doesn’t rate stocks on social or environmental factors. The top ten holdings include Lukoil, a privately-owned Russian oil company.

Is XSOE a good investment?

XSOE has outperformed the standard emerging markets index over the past three and five years. So if you are concerned about governance and the political risks faced by state-owned enterprises, this could be a good choice. However, if you want a fossil free fund or a fund that ranks stocks on environmental and social factors, XSOE is not the best choice.

XSOE Alternatives

  • If you want to invest in China only: the WisdomTree China ex-State-Owned Enterprises Fund (CXSE) is a China-focused fund that excludes SOEs
  • If you want a China-focused ESG Fund: the KraneShares MSCI China ESG Leaders Index ETF (KESG) rates Chinese stocks on ESG factors. Read the review of KESG
  • If you want a fossil free emerging markets ESG fund: the iShares ESG Advanced MSCI EM ETF (EMXF) incorporates ESG factors and excludes multiple controversial sectors beyond fossil fuels

NOT INVESTMENT ADVICE. The content is for informational purposes only; you should not construe any such information as investment advice.

Make an impact with your money. Sign up for our ESG newsletter

Read more

Frequently Asked Questions

How can I find a mutual fund like XSOE?

You can’t, XSOE is the only emerging markets fund that explicitly eliminates state-owned enterprises from its portfolio.