Designed to provide broad exposure to the Broad Emerging Market ETFs category of the market, the iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF) is a smart beta exchange traded fund launched on 12/08/2015.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
Managed by Blackrock, EMGF has amassed assets over $352.71 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. EMGF, before fees and expenses, 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.45% for EMGF, making it on par with most peer products in the space.
EMGF's 12-month trailing dividend yield is 2.69%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, China Mobile Ltd accounts for about 3.19% of total assets, followed by Tencent Holdings Ltd and Yum China Holdings Inc (YUMC).
The top 10 holdings account for about 23.77% of total assets under management.
Performance and Risk
So far this year, EMGF has added roughly 1.28%, and is down about -19.71% in the last one year (as of 05/24/2019). During this past 52-week period, the fund has traded between $37.92 and $51.17.
The ETF has a beta of 0.92 and standard deviation of 17.74% for the trailing three-year period. With about 214 holdings, it effectively diversifies company-specific risk.
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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $55.34 B in assets, Vanguard FTSE Emerging Markets ETF has $60.02 B. IEMG has an expense ratio of 0.14% and VWO charges 0.12%.
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.
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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iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
Yum China Holdings Inc. (YUMC) : Free Stock Analysis Report
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
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