Smart-Beta vs Market-Cap Emerging Market ETFs

Due to DEM’s underlying indexing methodology, investors should be aware of the differences between WisdomTree’s emerging market ETF and other popular market cap-weighted options, like the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) and the iShares MSCI Emerging Markets ETF (NYSEArca: EEM), the two largest emerging markets exchange traded funds by assets. Taiwan stands out with a 22.7% weight in DEM, compared to VWO’s 14.3% position and EEM’s 12.3%. Russia is DEM’s third largest country at 13.8%, compared to VWO’s 4.4% and EEM’s 4.0%.

DEM’s weighting methodology seems to be doing what it was intended to do as the ETF shows a 5.10% 12-month yield, whereas EEM has a 2.38% 12-month yield and VWO has a 3.09% 12-month yield.

WisdomTree Emerging Markets Equity Income Fund

For more information on the developing economies, visit our emerging markets category.

Max Chen contributed to this article.