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

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The iShares MSCI Emerging Markets Multifactor ETF (EMGF - Free Report) was launched on 12/08/2015, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Emerging Market ETFs category of the market.

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.

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.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $754.63 million, this makes it one of the larger ETFs in the Broad Emerging Market ETFs. EMGF is managed by Blackrock. EMGF seeks to match the performance of the MSCI Emerging Markets Diversified Multiple-Factor Index before fees and expenses.

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

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

The fund has a 12-month trailing dividend yield of 1.66%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

Taking into account individual holdings, Taiwan Semiconductor Manufacturing accounts for about 4.67% of the fund's total assets, followed by Tencent Holdings Ltd and Alibaba Group Holding Adr Represen (BABA - Free Report) .

Its top 10 holdings account for approximately 29.25% of EMGF's total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI Emerging Markets Multifactor ETF return is roughly 9.32% so far, and was up about 30.32% over the last 12 months (as of 07/08/2021). EMGF has traded between $42.15 and $55.13 in this past 52-week period.

The fund has a beta of 0.82 and standard deviation of 23.50% for the trailing three-year period. With about 271 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.

Vanguard FTSE Emerging Markets ETF (VWO - Free Report) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG - Free Report) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $81.40 billion in assets, iShares Core MSCI Emerging Markets ETF has $81.81 billion. VWO has an expense ratio of 0.10% and IEMG charges 0.11%.

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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