Designed to provide broad exposure to the Asia-Pacific (Developed) ETFs category of the market, the WisdomTree Japan SmallCap Dividend Fund (DFJ) is a smart beta exchange traded fund launched on 06/16/2006.
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.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
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
The fund is managed by Wisdomtree. DFJ has been able to amass assets over $775.29 M, 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.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.58%.
It has a 12-month trailing dividend yield of 1.78%.
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.
When you look at individual holdings, Sankyo Co Ltd accounts for about 0.83% of the fund's total assets, followed by Matsui Securities Co Ltd and Dic Corp.
The top 10 holdings account for about 6.26% of total assets under management.
Performance and Risk
The ETF has added about 6.55% so far this year and is down about -16.56% in the last one year (as of 02/05/2019). In the past 52-week period, it has traded between $60.90 and $83.40.
DFJ has a beta of 0.68 and standard deviation of 13.99% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 816 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 $3.91 B in assets, iShares MSCI Japan ETF has $15.78 B. BBJP has an expense ratio of 0.19% 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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iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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