Launched on 06/16/2006, the WisdomTree Japan SmallCap Dividend Fund (DFJ) is a smart beta exchange traded fund offering broad exposure to the Asia-Pacific (Developed) ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by Wisdomtree. It has amassed assets over $1.11 B, making it one of the larger ETFs in the Asia-Pacific (Developed) ETFs. DFJ seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index before fees and expenses.
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
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 this ETF are 0.58%, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.67%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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 0.76% of the fund's total assets, followed by Matsui Securities Co Ltd and Dic Corp.
The top 10 holdings account for about 5.83% of total assets under management.
Performance and Risk
So far this year, the ETF has lost about -3.21%, and it's up approximately 7.04% in the last one year (as of 09/24/2018). DFJ has traded between $73.20 and $85.46 in the past 52-week period.
The fund has a beta of 0.52 and standard deviation of 13.63% 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 $5.56 B in assets, iShares MSCI Japan ETF has $17.04 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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