Back to top

Image: Bigstock

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

Read MoreHide Full Article

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.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Managed by Blackrock, EMGF has amassed assets over $453.11 million, making it one of the larger 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

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.

EMGF's 12-month trailing dividend yield is 3.23%.

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, Alibaba Group Holding Adr Represen (BABA - Free Report) accounts for about 4.41% of the fund's total assets, followed by Tencent Holdings Ltd and Sk Hynix Inc.

EMGF's top 10 holdings account for about 26.51% of its total assets under management.

Performance and Risk

Year-to-date, the iShares Edge MSCI Multifactor Emerging Markets ETF has lost about -18.46% so far, and is down about -11.06% over the last 12 months (as of 04/29/2020). EMGF has traded between $30.50 and $46.67 in this past 52-week period.

EMGF has a beta of 0.98 and standard deviation of 22.88% for the trailing three-year period. With about 266 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 A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $45.94 billion in assets, Vanguard FTSE Emerging Markets ETF has $52.83 billion. IEMG has an expense ratio of 0.13% 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.

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.

Published in