A smart beta exchange traded fund, the iShares Edge MSCI Multifactor Emerging Markets 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?
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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
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
EMGF is managed by Blackrock, and this fund has amassed over $362.05 M, which makes it one of the average sized ETFs in the Broad Emerging Market ETFs. 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.45% for EMGF, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.75%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Alibaba Group Holding Adr Represen (BABA - Free Report) accounts for about 3.63% of total assets, followed by Sk Hynix Inc and Yum China Holdings Inc (YUMC - Free Report) .
EMGF's top 10 holdings account for about 23.28% of its total assets under management.
Performance and Risk
So far this year, EMGF has lost about -29.66%, and is down about -22.38% in the last one year (as of 03/17/2020). During this past 52-week period, the fund has traded between $32.04 and $46.67.
The ETF has a beta of 0.91 and standard deviation of 20.54% for the trailing three-year period. With about 270 holdings, it effectively diversifies company-specific risk.
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 A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $42.70 B in assets, Vanguard FTSE Emerging Markets ETF has $47.67 B. IEMG has an expense ratio of 0.14% and VWO charges 0.10%.
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.
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.