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 traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is sponsored by Wisdomtree. It has amassed assets over $444.85 M, making it one of the average sized ETFs in the Broad Developed World ETFs. IHDG seeks to match the performance of the WisdomTree International Hedged Quality Dividend Growth Index before fees and expenses.
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
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 0.58% for IHDG, making it one of the more expensive products in the space.
IHDG's 12-month trailing dividend yield is 0.34%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Novo Nordisk A/s (NOVOB) accounts for about 7.23% of total assets, followed by Diageo Plc (DGE) and British American Tobacco Plc (BATS).
The top 10 holdings account for about 35.82% of total assets under management.
Performance and Risk
The ETF has gained about 18.19% so far this year and is up about 5.92% in the last one year (as of 04/16/2019). In the past 52-week period, it has traded between $26.92 and $33.03.
The fund has a beta of 0.76 and standard deviation of 12.10% for the trailing three-year period, which makes IHDG a medium risk choice in this particular space. With about 264 holdings, it effectively diversifies company-specific risk.
WisdomTree International Hedged Quality Dividend Growth Fund is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should 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 $62.37 B in assets, iShares MSCI EAFE ETF has $63.57 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.
Is your investment advisor fumbling your financial future?
See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.” Click to get your free report.
WisdomTree International Hedged Quality Dividend Growth Fund (IHDG): ETF Research Reports
iShares MSCI EAFE ETF (EFA): ETF Research Reports
iShares Core MSCI EAFE ETF (IEFA): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research