The WisdomTree Japan SmallCap Dividend Fund (DFJ) made its debut on 06/16/2006, and is a smart beta exchange traded fund that provides broad exposure to the Asia-Pacific (Developed) 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix 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 Wisdomtree, DFJ has amassed assets over $405.09 M, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.
WisdomTree Japan SmallCap Dividend Index measures the performance of dividend-paying small capitalization companies in Japan. After the 300 largest companies have been removed from the WisdomTree Japan Dividend Index, the remaining companies are chosen for inclusion in the Index. Companies are weighted in the Index based on annual cash dividends paid.
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 DFJ, making it one of the more expensive products in the space.
The fund has a 12-month trailing dividend yield of 2.14%.
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, Haseko Corp accounts for about 1.18% of total assets, followed by Matsui Securities Co Ltd and Aozora Bank Ltd.
DFJ's top 10 holdings account for about 7.21% of its total assets under management.
Performance and Risk
The ETF has added about 1.09% and is down about -13.58% so far this year and in the past one year (as of 08/30/2019), respectively. DFJ has traded between $60.90 and $78.29 during this last 52-week period.
The ETF has a beta of 0.67 and standard deviation of 13.53% for the trailing three-year period, making it a medium risk choice in the space. With about 822 holdings, it effectively diversifies company-specific risk.
WisdomTree Japan SmallCap Dividend Fund is an excellent option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. There are other ETFs in the space which investors could consider as well.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $3.84 B in assets, iShares MSCI Japan ETF has $12.10 B. BBJP has an expense ratio of 0.19% and EWJ charges 0.47%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) 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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WisdomTree Japan SmallCap Dividend Fund (DFJ): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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