A High-Dividend EM ETF to Rein in Risk Exposure

Victory Capital has rolled out a high dividend-focused ETF to target yield opportunities in the emerging markets and the strategy also includes a volatility weighting methodology to limit potential risks associated with this segment of the global market.

On Thursday, Victory Capital launched the VictoryShares Emerging Market High Div Volatility Wtd ETF (NasdaqGM: CEY), which comes with a 0.5% expense ratio.

“Investors seeking income now have the option to further diversify their portfolios with dividend-yielding emerging market stocks,” Mannik Dhillon, President of VictoryShares and Solutions, said in a note. “With many emerging market companies currently out-yielding their U.S. counterparts, we believe it’s an appropriate time to consider a risk conscious, tax efficient approach to investing in high income-producing emerging market equities.”

The VictoryShares Emerging Market High Div Volatility Wtd ETF tries to reflect the performance of the CEMP Emerging Market High Dividend 100 Volatility Weighted Index.

The rules-based index begins with stocks taken from the CEMP Emerging Market 500 Volatility Weighted Index, a volatility weighted index comprised of the 500 largest emerging market companies by market capitalization with positive earnings in each of the four most recent quarters, and picks out the 100 highest dividend yielding stocks in the CEMP Emerging Market 500 Volatility Weighted Index, which are then weighted based on their daily standard deviation or volatility of daily price changes over the last 180 trading days. Stocks with lower volatility receive a higher weighting and stocks with higher volatility receive a lower weighting, according to a prospectus sheet.

Representative emerging market countries include China (Asia), Brazil (South America), Russia (Europe and Asia), India (Asia) and Egypt (Africa).

Dhillon pointed out that the ongoing positive sentiment in the emerging market as an asset class has attracted greater attention among investors. Moreover, given the extended low-rate environment, many income seekers are turning to alternative sources of yield, such as the rebounding emerging markets.

“We’ve been seeing a positive turn in the asset class across board,” Dhillon told ETF Trends in a call.