Launched on 12/08/2015, the iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF) is a smart beta exchange traded fund offering 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of 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
Managed by Blackrock, EMGF has amassed assets over $264.03 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain 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 has a 12-month trailing dividend yield of 2.51%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Tatneft (TATN) accounts for about 3% of total assets, followed by Itausa Investimentos Itau Pref Sa (ITSA4) and Sk Hynix Inc.
The top 10 holdings account for about 24.93% of total assets under management.
Performance and Risk
So far this year, EMGF has lost about -17.25%, and is down about -16.45% in the last one year (as of 11/26/2018). During this past 52-week period, the fund has traded between $38.26 and $53.84.
The ETF has a beta of 1.01 and standard deviation of 19.00% for the trailing three-year period. With about 218 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 $47.31 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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