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

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The iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF - Free Report) made its debut on 12/08/2015, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market 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.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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.

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 Blackrock. It has amassed assets over $297.41 M, making it one of the average sized ETFs in the Broad Emerging Market ETFs. Before fees and expenses, this particular fund seeks to match the performance of the MSCI Emerging Markets Diversified Multiple-Factor Index.

The MSCI Emerging Markets 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

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 this ETF are 0.45%, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 2.19%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Tencent Holdings Ltd accounts for about 3.36% of the fund's total assets, followed by Ishares Msci India Etf (INDA - Free Report) and Sk Hynix Inc.

The top 10 holdings account for about 25.31% of total assets under management.

Performance and Risk

So far this year, the ETF has lost about -5.43%, and is up roughly 4.83% in the last one year (as of 07/31/2018). EMGF has traded between $44.29 and $53.84 in the past 52-week period.

The ETF has a beta of 1.06 and standard deviation of 18.45% for the trailing three-year period. With about 206 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Edge MSCI Multifactor Emerging Markets 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 An Inclusion Index. IShares Core MSCI Emerging Markets ETF has $48.63 B in assets, Vanguard FTSE Emerging Markets ETF has $62.55 B. IEMG has an expense ratio of 0.14% and VWO charges 0.14%.

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.