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

A smart beta exchange traded fund, the iShares Emerging Markets Equit (EMGF) debuted on 12/08/2015, and offers broad exposure to the Broad Developed Market ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes 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 cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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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

The fund is managed by Blackrock, and has been able to amass over $595.17 million, which makes it one of the larger ETFs in the Broad Developed 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 Market 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 0.25% for this ETF, which makes it one of the cheaper products in the space.

EMGF's 12-month trailing dividend yield is 3.94%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

When you look at individual holdings, Taiwan Semiconductor Manufacturing accounts for about 5.88% of the fund's total assets, followed by Samsung Electronics Ltd and Tencent Holdings Ltd.

EMGF's top 10 holdings account for about 22.97% of its total assets under management.

Performance and Risk

So far this year, EMGF has added roughly 2.47%, and it's up approximately 3.72% in the last one year (as of 09/21/2023). During this past 52-week period, the fund has traded between $38.04 and $44.88.

EMGF has a beta of 0.75 and standard deviation of 17.21% for the trailing three-year period. With about 636 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Emerging Markets Equit is not a suitable option for investors seeking to outperform the Broad Developed 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 $70.44 billion in assets, Vanguard FTSE Emerging Markets ETF has $71.44 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

iShares Emerging Markets Equit (EMGF): ETF Research Reports

iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports

Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports

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Zacks Investment Research