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

Zacks Equity Research

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.

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.

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

Because the fund has amassed over $268.82 M, this makes it one of the average sized ETFs in the Broad Emerging Market ETFs. EMGF is managed by Blackrock. This particular fund seeks to match the performance of the MSCI Emerging Markets Diversified Multiple-Factor Index before fees and expenses.

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 this ETF, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 2.47%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, China Mobile Ltd accounts for about 3.34% of the fund's total assets, followed by Sk Hynix Inc and Tencent Holdings Ltd.

Its top 10 holdings account for approximately 24.15% of EMGF's total assets under management.

Performance and Risk

The ETF has added roughly 10.25% and is down about -16.67% so far this year and in the past one year (as of 01/31/2019), respectively. EMGF has traded between $37.92 and $52.86 during this last 52-week period.

The ETF has a beta of 0.89 and standard deviation of 18.36% for the trailing three-year period. With about 213 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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $57.28 B in assets, Vanguard FTSE Emerging Markets ETF has $59.83 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.

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