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

Sweta Killa

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?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

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.

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.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is managed by Blackrock, and has been able to amass over $336.22 M, which makes it one of the average sized ETFs in the Broad Emerging Market ETFs. 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

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.

Operating expenses on an annual basis are 0.45% for EMGF, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 2.42%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Taking into account individual holdings, China Mobile Ltd accounts for about 3.23% of the fund's total assets, followed by Yum China Holdings Inc (YUMC) and Tencent Holdings Ltd.

Its top 10 holdings account for approximately 24.02% of EMGF's total assets under management.

Performance and Risk

Year-to-date, the iShares Edge MSCI Multifactor Emerging Markets ETF return is roughly 12.74% so far, and is down about -10.70% over the last 12 months (as of 04/10/2019). EMGF has traded between $37.92 and $51.17 in this past 52-week period.

The ETF has a beta of 0.94 and standard deviation of 17.71% for the trailing three-year period. With about 215 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 $61.11 B in assets, Vanguard FTSE Emerging Markets ETF has $65.80 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.

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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iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF): ETF Research Reports
 
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
 
Yum China Holdings Inc. (YUMC) : Free Stock Analysis Report
 
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
 
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