Launched on 06/16/2006, the WisdomTree Japan SmallCap Dividend ETF (DFJ) is a smart beta exchange traded fund offering broad exposure to the Asia-Pacific (Developed) 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.
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.
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.
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.
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
Managed by Wisdomtree, DFJ has amassed assets over $240.14 million, making it one of the average sized ETFs in the Asia-Pacific (Developed) ETFs. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree Japan SmallCap Dividend Index.
WisdomTree Japan SmallCap Dividend Index measures the performance of dividend-paying small capitalization companies in Japan. After the 300 largest companies have been removed from the WisdomTree Japan Dividend Index, the remaining companies are chosen for inclusion in the Index. Companies are weighted in the Index based on annual cash dividends paid.
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.
Operating expenses on an annual basis are 0.58% for DFJ, making it one of the more expensive products in the space.
DFJ's 12-month trailing dividend yield is 2.68%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Haseko Corp accounts for about 1.46% of total assets, followed by Mitsubishi Gas Chemical Co Inc and Matsui Securities Co Ltd.
DFJ's top 10 holdings account for about 7.76% of its total assets under management.
Performance and Risk
Year-to-date, the WisdomTree Japan SmallCap Dividend ETF has lost about -8.11% so far, and it's up approximately 8.36% over the last 12 months (as of 08/26/2020). DFJ has traded between $49.20 and $75.84 in this past 52-week period.
The fund has a beta of 0.69 and standard deviation of 20.39% for the trailing three-year period, which makes DFJ a medium risk choice in this particular space. With about 797 holdings, it effectively diversifies company-specific risk.
WisdomTree Japan SmallCap Dividend ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $5.12 billion in assets, iShares MSCI Japan ETF has $9.91 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.49%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) 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.
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WisdomTree Japan SmallCap Dividend ETF (DFJ): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): 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.