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Inside WisdomTree's New Hedged Global Dividend & Small-Cap ETFs - ETF News And Commentary

Zacks Equity Research

WisdomTree has been proactive in launching products lately. The issuer has come up with new ETFs in every month of the ongoing quarter. Recently, the issuer rolled out two hedged ETFs, one in the international dividend arena and the other in the international small-cap space.

In any case, WisdomTree is almost at the helm of currency-hedged ETF investing style.  And this strategy would be extremely meaningful this year as the Fed looks to hike key rates sometime this year and most developed nations (even some emerging markets) are following easy money policy to boost their economies. As a result, the greenback is gaining strength against a basket of global currencies (read: Can Anyone Match WisdomTree in Currency-Hedged ETFs?).

Below we highlight the key characteristics and the future prospects of the two ETFs:

WisdomTree Global ex-U.S. Hedged Dividend Fund (DXUS) in Focus

This fund looks to track the performance of the dividend-paying stocks of the developed and emerging markets outside of the U.S. The fund is exposed to about 38 countries among which Japan (19.10%) and the U.K.  (15.64%) hold the top two spots. Financials (25.14%) and Consumer Discretionary (11.07%) are top two sectors of the fund. The product is free of concentration risk as no stock accounts for more than 1.92% of the fund (read: 3 Excellent Global Dividend ETF Choices for Your Portfolio).  

The wave of easy money polices across the globe, be it Europe or Asia, have brightened the appeal for dividend investing lately. Though the Fed is preparing for policy normalization this year, the modest U.S. growth momentum indicates a slower rate hike trajectory in the future. All these market forces should keep bond yields at check globally. As a result, investors looking for steady current income might shift their focus to high dividend stocks.  

Competition: The global dividend investing space is teeming with ETFs. Products like PowerShares International Dividend Achievers ETF (PID), SPDR S&P International Dividend ETF (DWX) and DJ Global Select Dividend Index Fund (FGD) have already accumulated considerable investor wealth and could pose as threats to this tenderfoot dividend ETF. However, given the backing from currency-hedging technique, DXUS should be able to wait out the competition easily.

International Hedged SmallCap Dividend Fund (HDLS) in Focus

The fund looks to give exposure of the small-capitalization slice of the dividend-paying segment of the world outside the U.S. and Canada. The fund is heavy on Japan (29.72%) followed by the U.K. (16.84%) and Australia (15.18%). As far as sector breakdown is concerned, Industrials and Consumer Discretionary top the list with over 20% exposure each. The next two positions are occupied by Financials (17.10%) and IT (10.82%).

Individual holding wise, China Power International Deve (1.10%), Shenzhen Investment Ltd (0.72%) and IOOF Holdings Ltd (0.61%) are the top three holdings. This ensures very low company-specific concentration risk. The fund charges 58 bps in fees.

Investors should note that small caps are seen as the true gauge of domestic economy. In a growing economy, these pint-sized securities perform better than large-cap stocks as the former generates most of their revenues from the domestic market. These are less ruffled by global economic concerns.

Notably, a flurry of easy money in most of the developed world will lead to stepped-up economic activities, and rise in business and consumer confidence. This would in turn benefit the small-cap companies (read: 3 Foreign Small-Cap ETFs to Watch Amid Global Easing).

Competition: The global small-cap ETF space is not yet chockablock. Only a handful of products such as iShares Enhanced International Small-Cap ETF (IEIS), Schwab Fundamental International Small Cap Company Index (FNDC), SPDR S&P International Small Cap ETF (GWX) and Schwab International Small-Cap Equity ETF (SCHC) might give tough competition to the newbie. However, the currency-hedged approach of HDLS gives it an edge over its peers.


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WISDMTR-GL HDV (DXUS): ETF Research Reports
PWRSH-INTL DVD (PID): ETF Research Reports
SPDR-SP INT DIV (DWX): ETF Research Reports
FT-DJ GL SEL DV (FGD): ETF Research Reports
WISDMTR-INT HDV (HDLS): ETF Research Reports
ISHRS-EN INT SC (IEIS): ETF Research Reports
SCHWAB-F INT SC (FNDC): ETF Research Reports
SPDR-SP INTL SC (GWX): ETF Research Reports
SCHWAB-INT SC (SCHC): ETF Research Reports
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