A smart beta exchange traded fund, the WisdomTree Japan SmallCap Dividend Fund (DFJ) debuted on 06/16/2006, and offers broad exposure to the Asia-Pacific (Developed) 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.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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 managed by Wisdomtree. DFJ has been able to amass assets over $1.12 B, making it one of the larger 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
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Operating expenses on an annual basis are 0.58% for this ETF, which makes it on par with most peer products in the space.
DFJ's 12-month trailing dividend yield is 1.70%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Sankyo Co Ltd accounts for about 0.74% of the fund's total assets, followed by Matsui Securities Co Ltd and Dic Corp.
Its top 10 holdings account for approximately 5.87% of DFJ's total assets under management.
Performance and Risk
DFJ has lost about -4.72% so far this year, and as of 08/30/2018, is up roughly 6.08% in the last one year. In the past 52-week period, the fund has traded between $72.04 and $85.46.
The fund has a beta of 0.54 and standard deviation of 13.95% for the trailing three-year period, which makes DFJ a medium choice in this particular space. With about 823 holdings, it effectively diversifies company-specific risk.
WisdomTree Japan SmallCap Dividend Fund is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
WisdomTree Japan Hedged Equity Fund (DXJ) tracks WisdomTree Japan Hedged Equity Index and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. WisdomTree Japan Hedged Equity Fund has $5.36 B in assets, iShares MSCI Japan ETF has $17.11 B. DXJ has an expense ratio of 0.48% and EWJ charges 0.49%.
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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WISDMTR-JP SC D (DFJ): ETF Research Reports
ISHARS-JAPAN (EWJ): ETF Research Reports
WISDMTR-J HEF (DXJ): ETF Research Reports
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