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?
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.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $424.22 M, this makes it one of the average sized ETFs in the Broad Emerging Market ETFs. EMGF is managed by Blackrock. 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for EMGF are 0.45%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.84%.
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.
Looking at individual holdings, Sk Hynix Inc accounts for about 2.90% of total assets, followed by China Mobile Ltd and Tencent Holdings Ltd.
Its top 10 holdings account for approximately 23.16% of EMGF's total assets under management.
Performance and Risk
So far this year, EMGF has gained about 8.54%, and was up about 1.21% in the last one year (as of 09/17/2019). During this past 52-week period, the fund has traded between $37.92 and $43.96.
EMGF has a beta of 0.95 and standard deviation of 17.19% for the trailing three-year period. With about 243 holdings, it effectively diversifies company-specific risk.
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 $55.21 B in assets, Vanguard FTSE Emerging Markets ETF has $62.93 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.
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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