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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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
Because the fund has amassed over $434.06 M, this makes it one of the average sized ETFs in the Broad Developed World ETFs. IHDG is managed by Wisdomtree. 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
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.
Annual operating expenses for IHDG are 0.58%, which makes it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 0.22%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, 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 7.27% of total assets, followed by Diageo Plc (DGE) and British American Tobacco Plc (BATS).
IHDG's top 10 holdings account for about 34.95% of its total assets under management.
Performance and Risk
Year-to-date, the WisdomTree International Hedged Quality Dividend Growth Fund has lost about -10.27% so far, and is down about -10.67% over the last 12 months (as of 12/19/2018). IHDG has traded between $28.36 and $33.03 in this past 52-week period.
The fund has a beta of 0.71 and standard deviation of 12.96% for the trailing three-year period, which makes IHDG a medium risk choice in this particular 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 $51.89 B in assets, iShares MSCI EAFE ETF has $61.67 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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WISTR-INT HDG (IHDG): ETF Research Reports
EMG MKT FREE AS (EFA): ETF Research Reports
ISHARS-CR MS EA (IEFA): ETF Research Reports
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