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 long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $280.24 M, this makes it one of the average sized ETFs in the Broad Emerging Market ETFs. EMGF is managed by Blackrock. Before fees and expenses, this particular fund 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 2.58%.
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 3.31% of total assets, followed by Sk Hynix Inc and Tencent Holdings Ltd.
EMGF's top 10 holdings account for about 24.14% of its total assets under management.
Performance and Risk
Year-to-date, the iShares Edge MSCI Multifactor Emerging Markets ETF has lost about -19.58% so far, and is down about -16.17% over the last 12 months (as of 12/18/2018). EMGF has traded between $38.26 and $53.84 in this past 52-week period.
The fund has a beta of 1.02 and standard deviation of 19.05% for the trailing three-year period. With about 231 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 $48.83 B in assets, Vanguard FTSE Emerging Markets ETF has $54.71 B. IEMG has an expense ratio of 0.14% and VWO charges 0.14%.
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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ISHARS-FS MSCI (EMGF): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
ISHARS-CR MS EM (IEMG): ETF Research Reports
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