Designed to provide broad exposure to the Broad Emerging Market ETFs category of the U.S. equity 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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
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 $232.51 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, EMGF 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 one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 1.95%.
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.
Taking into account individual holdings, Ishares Msci India Etf (INDA) accounts for about 3.83% of the fund's total assets, followed by Tencent Holdings Ltd (700) and Itausa Investimentos Itau Pref Sa (ITSA4).
EMGF's top 10 holdings account for about 26.42% of its total assets under management.
Performance and Risk
EMGF has lost about -0.02% so far this year, and as of 04/27/2018, is up roughly 22.98% in the last one year. In the past 52-week period, the fund has traded between $40.88 and $53.84.
EMGF has a beta of 1.04 and standard deviation of 18.65% for the trailing three-year period. With about 178 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 $50.49 B in assets, Vanguard FTSE Emerging Markets ETF has $67.40 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-M INDIA (INDA): ETF Research Reports
VANGD-FTSE EM (VWO): ETF Research Reports
ISHARS-FS MSCI (EMGF): ETF Research Reports
ISHARS-CR MS EM (IEMG): ETF Research Reports
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