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Is iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF) a Strong ETF Right Now?

Zacks Equity Research

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?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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

The fund is managed by Blackrock, and has been able to amass over $415.04 M, which makes it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund, 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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for EMGF are 0.45%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 2.91%.

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, Tencent Holdings Ltd accounts for about 2.92% of total assets, followed by Sk Hynix Inc and China Mobile Ltd.

Its top 10 holdings account for approximately 22.64% of EMGF's total assets under management.

Performance and Risk

The ETF return is roughly 6.22% so far this year and is down about -9.76% in the last one year (as of 08/02/2019). In the past 52-week period, it has traded between $37.92 and $46.18.

The fund has a beta of 0.94 and standard deviation of 17.11% for the trailing three-year period. With about 243 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Edge MSCI Multifactor Emerging Markets ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $56.13 B in assets, Vanguard FTSE Emerging Markets ETF has $61.61 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.

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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iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF): ETF Research Reports
 
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
 
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
 
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