ETF Spotlight: Low Volatility, Emerging Market Dividends

November 9th at 6:02am by Tom Lydon

ETF Spotlight on EGShares Low Volatility Emerging Markets Dividend ETF (NYSEArca: HILO), part of an ongoing series.

Assets: $80.4 million.

Objective: The EGShares Low Volatility Emerging Markets Dividend fund tries to reflect the performance of the Indxx Low Volatility Emerging Markets Dividend Index, which is designed to generate higher income with less volatility than the MSCI Emerging Markets Index through low-beta stocks.

Holdings: Top holdings include Indiabulls Financial Services 5.9%, Turk Traktor ve Ziraat Makineleri 5.8%, Vodacom Group 5.2%, Redefine Props 4.8% and Shin Corporation Public Co. 4.6%. Holdings are weighted by dividend yield.

What You Should Know:

  • Emerging Global Advisors sponsors the fund.
  • HILO has a 0.85% expense ratio.
  • The fund has 30 holdings and the top ten make up 45.5% of the overall portfolio.
  • Country allocations include: South Africa 21.4%, Turkey 16.1%, India 11.4%, China 9.5%, Malaysia 9.1%, Mexico 9.1%, Thailand 7.5%, Poland 4.9%, Colombia 3.9% and Philippines 2.6%.
  • Sector allocations include: basic materials 3.0%, consumer cyclical 12.0%, financial services 13.1%, real estate 8.3%, telecom services 20.1%, energy 11.5%, industrials 8.5%, technology 2.9%, consumer defensive 10.7%, healthcare 3.2% and utilities 6.8%.
  • HILO has a 3.11% yield.
  • “In the back-test, this index has provided higher returns with less volatility over the last four years, relative to the market-cap-weighted MSCI Emerging Markets Index,” according to Morningstar analyst Patricia Oey.
  • “The emerging-markets equities asset class, with its exposure to different economic trends and potentially faster-growing companies, provides diversification benefits for U.S. investors,” Oey added.

The Latest News:

  • Markets remain volatile as investors focus on Europe and the Greek bailout vote.
  • “Volatility will likely continue to be the name of the game going forwards as markets lurch from one crisis to the next and investors will continue to trade with extreme caution,” Mike McCudden, head of derivatives at Interactive Investor, said in a NewsTimes article.
  • Additionally, the so-called fiscal cliff continues to weigh on emerging market equities.
  • “Most negativity in emerging markets is coming from developed markets,” Lars Christensen, chief emerging-markets analyst at Danske Bank A/S, said in a Bloomberg article. “There are concerns about the fiscal cliff situation in the U.S.”
  • “The market focus is coming back to the fiscal cliff now and the issue is still there,” Wu Kan, a fund manager at Dazhong Insurance Co. in Shanghai, said in the Bloomberg article. “If the U.S. slips back into a recession, it’ll deal a heavy blow to exports from emerging nations.”

EGShares Low Volatility Emerging Markets Dividend ETF

For past stories in this series, visit our ETF Spotlight category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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