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Is iShares MSCI Emerging Markets Multifactor ETF (EMGF) a Strong ETF Right Now?

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A smart beta exchange traded fund, the iShares MSCI Emerging Markets Multifactor ETF (EMGF - Free Report) debuted on 12/08/2015, and offers broad exposure to the Broad Emerging Market 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.

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.

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.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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 managed by Blackrock. EMGF has been able to amass assets over $847.70 million, making it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund seeks to match the performance of the MSCI Emerging Markets Diversified Multiple-Factor Index before fees and expenses.

The MSCI Emerging Market Diversified Multiple-Factor Index is composed of stocks of large and mid-capitalization companies in emerging markets that have favourable exposure to target style factors subject to constraints.

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.

Annual operating expenses for EMGF are 0.45%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 3.20%.

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.

Looking at individual holdings, Taiwan Semiconductor Manufacturing accounts for about 4.79% of total assets, followed by China Construction Bank Corp H and Tencent Holdings Ltd.

The top 10 holdings account for about 23.49% of total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI Emerging Markets Multifactor ETF has lost about -15.42% so far, and is down about -16.36% over the last 12 months (as of 06/22/2022). EMGF has traded between $42.72 and $54.48 in this past 52-week period.

EMGF has a beta of 0.74 and standard deviation of 23.30% for the trailing three-year period. With about 293 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI Emerging Markets Multifactor ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core MSCI Emerging Markets ETF (IEMG - Free Report) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $65.96 billion in assets, Vanguard FTSE Emerging Markets ETF has $71.58 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.

Bottom Line

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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