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

Zacks Equity Research
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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.

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

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.

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

The fund is sponsored by Blackrock. It has amassed assets over $258.55 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. EMGF 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.45% for this ETF, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 2.45%.

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 3.31% of the fund's total assets, followed by Tencent Holdings Ltd and Sk Hynix Inc.

The top 10 holdings account for about 25.38% of total assets under management.

Performance and Risk

The fund's year-to-date return has lost about -15.07%, and is down about -9.77% in the last one year (as of 09/18/2018). EMGF has traded between $41.61 and $53.84 in the past 52-week period.

The fund has a beta of 0.94 and standard deviation of 18.49% for the trailing three-year period. With about 200 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 $47.28 B in assets, Vanguard FTSE Emerging Markets ETF has $57.32 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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ISHARS-FS MSCI (EMGF): ETF Research Reports
 
ISHARS-M INDIA (INDA): ETF Research Reports
 
VANGD-FTSE EM (VWO): ETF Research Reports
 
ISHARS-CR MS EM (IEMG): ETF Research Reports
 
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