Making its debut on 12/08/2015, smart beta exchange traded fund iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF) provides investors broad exposure to the Broad Emerging Market ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $532.34 million, this makes it one of the larger ETFs in the Broad Emerging Market ETFs. EMGF is managed by Blackrock. Before fees and expenses, EMGF seeks to match the performance of the MSCI Emerging Markets Diversified Multiple-Factor Index.
The MSCI Emerging Markets Diversified Multiple Factor Index is composed of stocks of large and mid-capitalization companies in emerging markets that have favourable exposure to target style factors subject to constraints.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund’s return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.45%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.68%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Alibaba Group Holding Adr Represen (BABA) accounts for about 5.27% of total assets, followed by Tencent Holdings Ltd and Taiwan Semiconductor Manufacturing.
The top 10 holdings account for about 26.06% of total assets under management.
Performance and Risk
So far this year, EMGF has lost about -3.95%, and is up about 4.95% in the last one year (as of 07/29/2020). During this past 52-week period, the fund has traded between $30.50 and $46.67.
The fund has a beta of 0.93 and standard deviation of 23.63% for the trailing three-year period. With about 266 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Edge MSCI Multifactor Emerging Markets ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $53.04 billion in assets, Vanguard FTSE Emerging Markets ETF has $60.47 billion. IEMG has an expense ratio of 0.13% and VWO charges 0.10%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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