The only way to play emerging markets that won't crush you

The Inside ETF conference swings into its third day on Tuesday.

Late in the afternoon, I will be moderating a panel, "The Great Emerging Market Debate," with Richard Bernstein, Marc Faber, Dennis Gartman and Marten Hoekstra.

Most of the commentary so far has been bearish on emerging markets, and no more so than Jeff Gundlach of DoubleLine Capital saying the sector could fall by another 40 percent. Still, there's a lot of great ETFs that look into the emerging markets space. The better way to play emerging markets is through the young consumers, which make up the vast majority of the emerging markets world.

Here's a few of my favorites:

1. Kraneshares CSI China Internet (KWEB), which invests in publicly traded Chinese companies whose primary business is Internet-related: Alibaba, Tencent Holdings, Baidu, JD.com, Qihoo, etc. The advantage of this fund is that it invests in publicly traded Chinese companies wherever they are traded, so they get exposure, for example, to Alibaba, which lists only in the U.S. and is left off of other Chinese indexes.
   
2. EGShares Emerging Markets Consumer ETF () invests in emerging markets consumer companies: Brazilian beer giant Ambev, India's Tata Motors, Mexican beverage producer Fomento Economico, and Mexican TV producer Grupo Televisa. The only downside is the relatively small size of the holdings, at only 30 companies.
3. Emerging Markets Internet & Ecommerce ETF (EMQQ) is similar to KWEB but broader, investing not just in Chinese e-commerce but also South Korea, South Africa, Russia and Brazil.

Not surprisingly, given the squeamishness around emerging markets, these funds do not have big assets under management. They range from a respectable $480 million for ECON to $150 million for KWEB, to only $10 million for EMQQ.

To get big assets under management, you have to look at iShares MSCI Emerging Markets ETF (EEM), with $18 billion, or Vanguard FTSE Emerging Markets (VWO), with $29 billion.

But if you are interested in getting exposure to the most important part of the emerging markets story — young citizens — many of these larger ETF have problems. First, many have very heavy exposure to "old China," the heavy industry and banking sectors, that are burdened with debt and slow-growing. Some, such as Vanguard's VWO, will not include Chinese stocks that are listed outside of China, which would exclude the biggest consumer name of all: Alibaba.

Kevin Carter of Big Tree Capital recently spoke to etf.com. Carter is CEO of AlphaShares, an ETF family that has several emerging markets ETFs, and he, too, believes the correct way to play emerging markets is through the consumer.