Value Factors and Emerging Markets ETFs

DGS, like many of the other WisdomTree dividend ETFs, weighs constituents companies based on annual cash dividends paid. The $1.7 billion ETF has a distribution yield of 4%. Taiwan dominates the ETF at 27.3% of its weight while South Korea, Malaysia and South Africa all receive weights of more than 9%.

The iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEArca: EEMV) has also been a hit with investors. EEMV has captured $2.5 billion in assets in just 26 months on the market.  Over 47% of EEMV’s country weight is allocated to China, Taiwan and South Korea.  The fund is down 3.9% this year, which is still better than EEM and VWO.

Low volatility “strategies can have high turnover and can include securities that are not that liquid. With higher transaction expenses in emerging markets, a low-volatility index without appropriate liquidity and investability screens could be very costly to replicate and drag on the performance of the fund relative to its index,” according to Oey.

EEMV has a legitimate rival in the form of the PowerShares S&P Emerging Markets Low Volatility Portfolio (NYSEArca: EELV). Investors have started to take note of EELV this year as the fund has pulled in $140.5 million of its $221.5 million in assets since the start of 2013.

Over 51% of EELV’s country weight goes to Taiwan, Malaysia, and South Korea. EELV has also outperformed VWO and EEM this year.

WisdomTree Emerging Markets SmallCap Dividend Fund

Tom Lydon’s clients own shares of EEM.