SOEs are treated warily by investors and are defined as companies where government ownership exceeds 20 per cent of outstanding shares.

“Over time, government influence on SOEs can lead to quite large but fairly inefficient businesses. This influence can stagnate the long-term growth potential of these companies in their respective emerging markets (EM) economies.  A large portion of existing emerging market indices are made up of SOEs increasing the risk investors are taking with their EM exposure,” Aneeka Gupta, director of research at WisdomTree, said.

The UCITS ETF will form part of the group's $5.8 billion range of ex-state-owned enterprises strategies. In tandem with avoiding SOEs and applying ESG screening, the fund is overweight on exposure to "new economy" sectors such as IT and technology, consumer discretionary and communication services.

“SOEs tend to be found in the old economy sectors and are generally less dynamic and innovative than companies in thriving new economy sectors. We anticipate EM growth to come from the innovative corners of the market and companies displaying strong fundamentals – two areas non-SOEs in emerging markets have a clear advantage,” Gupta added.