How to Approach Emerging Markets; Value, Growth and Diversification

The developing economy growth story is too big to ignore. Yet, the space poses a heightened risk for investors and has been battered by Covid-19 over the past year and a half.

In the upcoming webcast, How to Approach Emerging Markets; Value, Growth and Diversification, Emily Roland, Co-Chief Investment Strategist, John Hancock Investment Management; Joseph Hohn, Senior Portfolio Manager, Dimensional Fund Advisors; and Ryan Wellman, Product Manager, John Hancock Investment Management, will outline a compelling case for emerging-market stocks.

Investors can access the emerging markets and better manage the risks involved through a smart beta exchange traded fund strategy. For example, the John Hancock Multifactor Emerging Markets ETF (NYSEArca: JHEM) tries to reflect the performance of the John Hancock Dimensional Emerging Markets Index, which tracks emerging market stocks and weights the securities on a rules-based process that may be referred to as multi-factor investing or smart beta.

The fund’s indexing methodology is backed by the investment expertise of Dimensional Fund Advisors.

The underlying index weights screens components based on smaller market capitalizations; lower relative price as defined by price-to-book; and higher profitability as defined by operating income over book. Companies that exhibit these characteristics will generally receive an increased weight relative to their unadjusted weight.

The portfolio includes momentum screens where low momentum securities are flagged for no additional buys. Small weight changes are implemented to avoid making changes that do not meaningfully improve the expected return-and-risk profile of the overall index. Lastly, the index includes an enhanced redistribution, allowing proceeds to be allocated to increase factor exposure and potentially reduce turnover when sizable securities are removed.

Through its indexing methodology, the ETF tries to incorporate measured flexibility during reconstitution to maintain focus while balancing the trade-offs among competing premiums. The approach is designed to focus on the asset class and factors, control unnecessary turnover and minimize unnecessary trading costs.

Financial advisors who are interested in learning more about the emerging markets can register for the Wednesday, July 28 webcast here.