The WisdomTree Japan SmallCap Dividend Fund (DFJ) was launched on 06/16/2006, and is a smart beta exchange traded fund designed to offer broad exposure to the Asia-Pacific (Developed) ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
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 $430.94 M, this makes it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. DFJ is managed by Wisdomtree. 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for DFJ are 0.58%, which makes it one of the more expensive products in the space.
DFJ's 12-month trailing dividend yield is 1.99%.
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.
When you look at individual holdings, Haseko Corp accounts for about 1.23% of the fund's total assets, followed by Matsui Securities Co Ltd and Aozora Bank Ltd.
Its top 10 holdings account for approximately 7.36% of DFJ's total assets under management.
Performance and Risk
Year-to-date, the WisdomTree Japan SmallCap Dividend Fund return is roughly 8.32% so far, and is down about -8.41% over the last 12 months (as of 09/23/2019). DFJ has traded between $60.90 and $78.29 in this past 52-week period.
The fund has a beta of 0.68 and standard deviation of 13.52% for the trailing three-year period, which makes DFJ a medium risk choice in this particular 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 $4.15 B in assets, iShares MSCI Japan ETF has $11.75 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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