Markets

Yet Another Global Small-Cap Dividend ETF By WisdomTree

WisdomTree has been quite upbeat in rolling out products lately especially on the trending theme. Since the international small-cap space will be in focus in the coming days on a flurry of policy easing as against the U.S. economy, WisdomTree quite strategically launched an ETF namely, WisdomTree Global SmallCap Dividend Fund ( GSD ) (read: 3 Foreign Small-Cap ETFs to Watch Amid Global Easing ).

This is not WisdomTree's first attempt in this field as a product called Wisdomtree International Hedged Small-Cap ETF ( HDLS ) is already in place. But there is a huge difference between these two products. HDLS follows a currency-hedged approach while the newbie does not. Moreover, HDLS considers dividend-paying small-cap stocks of the world outside the U.S. and Canada whereas GSD has a much wider spectrum bringing all the developed and developing economies stocks' under one roof.

Below we highlight the key characteristics and the prospects of GSD:

GSD in Focus

GSD looks to provide exposure to global small-cap equities which pay out decent dividends and increases it over time. Sector wise, Financials dominates the fund with 26.35% allocations, closely followed by Industrials (20.0%), Consumer Discretionary (15.4%) and Materials (9.18%).

Geographically, the U.S. takes about 48.72% of the total basket, with Japan taking the second spot holding about 10.91%. The other regions account for single-digit holdings each.

The company-specific risks should be minimal in the fund as the index houses as many as 491 stocks. The fund charges 43 bps in fees.

How Could it Fit in a Portfolio?

The ETF could be well suited for investors seeking higher returns from global small caps with low risk. Small caps are considered the measure of domestic economy. In a growing economy, these pint-sized securities perform the best as these generate most of their revenues from the domestic market. These are less ruffled by global economic concerns (read: 4 Beaten Down Small Cap ETFs to Buy Now ).

The newly launched ETF's heavy exposure in the U.S. and Japan will enable it to ride out steady economic growth, especially in the former. Though the Japanese economy is presently in a recession, its central bank is pursuing an ultra-easy monetary policy. Yes, the Fed is preparing for a lift-off in the U.S., but this central bank repeatedly notified a slower rate hike trail when the step is actually enacted.

Other underlying nations including the UK, Canada and Australia have also chosen the accommodate policy route to boost their own economies. This will lead to stepped-up activities, and rising business and consumer confidence which in turn will benefit small-cap companies. The product should be a good engine for dividend yield too as it focuses on dividend paying companies with the potential to hike the same (read: 5 Dividend ETFs for Growth ).

Competition

The global small-cap ETFs space is not yet teeming but slowly finding candidates. As of now, only a handful of products such as Lattice Global Small Cap Strategy ETF ( ROGS ), iShares Enhanced International Small-Cap ETF ( IEIS ), Schwab Fundamental International Small Cap Company Index ( FNDC ), SPDR S&P International Small Cap ETF ( GWX ) and Schwab International Small-Cap Equity ETF ( SCHC ) can give tough competition to the newcomer.

The other available products, namely ROGS, IEIS, FNDC, GWX and SCHC, charge respectively 60 bps, 49 bps, 46 bps, 40 bps and 18 bps in fees, some of which are lower than GSD. Though the region-exposure profile of ROGS is pretty similar to that of GSD, a higher expense ratio offers less score to ROGS to beat GSD on the asset count.

Among others, very few peers offer as much diversification as this new entrant does as most of the funds revolve around the developed market and are not exposed to the U.S. economy like GSD. This slight tilt in allocation along with the current income appeal in the small-cap spectrum should help GSD in finding a large following.

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WISDMTR-GL SCDV (GSD): ETF Research Reports

WISDMTR-INT HDV (HDLS): ETF Research Reports

LATTICE GLB SCS (ROGS): ETF Research Reports

ISHRS-EN INT SC (IEIS): ETF Research Reports

SCHWAB-F INT SC (FNDC): ETF Research Reports

SPDR-SP INTL SC (GWX): ETF Research Reports

SCHWAB-INT SC (SCHC): 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.


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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