MDebuting on 02/23/2012, the smart beta exchange-traded fund iShares Emerging Markets Dividend ETF (DVYE) offers investors broad exposure to the Broad Emerging Markets ETF category of the market.
What are Smart Beta ETFs?
Market cap weighted indices were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market capitalization weighted indices offer an inexpensive, convenient and transparent way to track market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection and choose another type of fund that follows unweighted capitalization strategies: the smart beta.
This type of index follows this same mindset, as it attempts to select stocks that have the best chance of risk-return performance; unweighted capitalization strategies base selection on certain fundamental characteristics, or a combination of these characteristics.
The smart beta space offers investors many different choices, ranging from equal weighting, one of the simpler strategies, to more complex strategies like fundamental weighting and volatility / momentum. However, not all of these methodologies have been able to provide remarkable returns.
Fund promoter and index
The fund is managed by Blackrock. DVYE has been able to raise over $ 813.70 million in assets, making it one of the largest ETFs of the major emerging market ETFs. Before fees and expenses, DVYE seeks to match the performance of the Dow Jones Emerging Markets Select Dividend Index.
The Dow Jones Emerging Markets Select Dividend Index measures the performance of companies in emerging markets that have provided relatively high dividend yields on a consistent basis over time.
Cost and other expenses
When considering the total return of an ETF, expense ratios are an important factor. And, cheaper funds can dramatically outperform their more expensive cousins in the long run if all other factors remain equal.
The operating expenses on an annual basis are 0.49% for this ETF, making it comparable to most peer products in the space.
Its 12-month dividend yield is 6.84%.
Sector exposure and main titles
Even though ETFs offer diversified exposure that minimizes the risk associated with individual stocks, it is still important to examine a fund’s holdings before investing. Fortunately, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Globaltrans Investment Gdr Plc (GLTR) represents around 2.45% of the fund’s total assets, followed by Transmissora Alianca Energia Eletr (TAEE11) and Cteep Companhia De Transmissao De (TRPL4).
Its top 10 holdings represent approximately 17.49% of DVYE’s total assets under management.
Return and risk
So far this year the DVYE yield is around 11.32% and has increased by around 40.63% in the last year (as of 10/29/2021). Over the past 52 weeks the fund has traded between $ 29.70 and $ 41.57.
DVYE has a beta of 0.86 and a standard deviation of 21.82% for the three-year period, making the fund a medium risk choice in the space. With around 118 participations, it effectively diversifies the risk specific to the company.
The IShares Emerging Markets Dividend ETF is a reasonable option for investors looking to outperform the Broad Emerging Markets ETF segment of the market. However, there are other ETFs in the space that investors might consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks the MSCI Emerging Markets Investable Market index and the Vanguard FTSE Emerging Markets (VWO) ETF tracks the FTSE Emerging Markets All Cap China A Inclusion index. IShares Core MSCI Emerging Markets ETF has $ 80.40 billion in assets, Vanguard FTSE Emerging Markets ETF has $ 81.19 billion. IEMG has an expense ratio of 0.11% and VWO charges 0.10%.
Investors looking for cheaper and less risky options should consider traditional market capitalization-weighted ETFs that aim to match the returns of ETFs in large emerging markets.
To learn more about this and other ETFs, search for products that match your investment objectives, and read articles on the latest developments in the ETF investment universe, please visit Zacks ETF Center.
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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.