Making its debut on 05/07/2014, smart beta exchange traded fund WisdomTree International Hedged Quality Dividend Growth Fund (IHDG) provides investors broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
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
The fund is managed by Wisdomtree, and has been able to amass over $390.66 M, which makes it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree International Hedged Quality Dividend Growth Index.
The WisdomTree International Hedged Quality Dividend Growth Index is designed to provide exposure to the developed market companies while at the same time neutralizing exposure to fluctuations between the value of foreign currencies and the U.S. dollar.
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.
Annual operating expenses for IHDG are 0.58%, which makes it one of the more expensive products in the space.
It has a 12-month trailing dividend yield of 0.21%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Looking at individual holdings, Novo Nordisk A/s (ADS) accounts for about 7.79% of total assets, followed by Diageo Plc (SGSN) and British American Tobacco Plc (CON).
The top 10 holdings account for about 34.78% of total assets under management.
Performance and Risk
Year-to-date, the WisdomTree International Hedged Quality Dividend Growth Fund return is roughly 2.88% so far, and is down about -11.15% over the last 12 months (as of 01/15/2019). IHDG has traded between $26.92 and $33.03 in this past 52-week period.
The ETF has a beta of 0.72 and standard deviation of 13.08% for the trailing three-year period, making it a medium risk choice in the space. With about 269 holdings, it effectively diversifies company-specific risk.
WisdomTree International Hedged Quality Dividend Growth Fund is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core MSCI EAFE ETF (IEFA) tracks MSCI EAFE Investable Market Index and the iShares MSCI EAFE ETF (EFA) tracks MSCI EAFE Index. IShares Core MSCI EAFE ETF has $54.10 B in assets, iShares MSCI EAFE ETF has $64.22 B. IEFA has an expense ratio of 0.08% and EFA charges 0.31%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World 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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