Technology

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

The iShares MSCI Emerging Markets Multifactor ETF (EMGF) 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?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

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.

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 $582.95 million, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. EMGF, before fees and expenses, 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

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 this ETF, which makes it on par with most peer products in the space.

EMGF's 12-month trailing dividend yield is 2.57%.

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) accounts for about 6.44% of the fund's total assets, followed by Tencent Holdings Ltd and Taiwan Semiconductor Manufacturing.

The top 10 holdings account for about 28.24% of total assets under management.

Performance and Risk

The ETF has gained about 0.11% so far this year and is up about 8.09% in the last one year (as of 10/28/2020). In the past 52-week period, it has traded between $30.50 and $46.67.

EMGF has a beta of 0.91 and standard deviation of 23.78% for the trailing three-year period. With about 264 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI Emerging Markets Multifactor ETF is not a suitable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $55.99 billion in assets, Vanguard FTSE Emerging Markets ETF has $62.82 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.


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iShares MSCI Emerging Markets Multifactor ETF (EMGF): ETF Research Reports
 
Alibaba Group Holding Limited (BABA): Free Stock Analysis Report
 
iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
 
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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