ROAM Outperforms Key Cap-Weighted Emerging Markets ETF

Hartford Funds launched its Hartford Multifactor Emerging Markets ETF (ROAM) back in 2015. The multifactor fund tracks an index that targets emerging market stocks based on certain factor exposures while also seeking to reduce volatility by 15%.

The approach has proven to be a good one in the current market environment. ROAM has outperformed the nearly $70 billion iShares Core MSCI Emerging Markets ETF (IEMG) during the past few years. In 2023 alone so far, it is up 9.5% versus IEMG’s total return of just 2.4%. Additionally, over the 12 months ending September 27, ROAM delivered a total return of 20%, almost double the 10.8% recorded by IEMG.

ROAM Offers Different Angle on Emerging Markets

Using VettaFi’s analytics platform LOGICLY allows a deeper dive to understanding what might be driving this significant outperformance. For example, despite ROAM having just under 300 holdings versus the 2,700 in IEMG’s portfolio, the Hartford fund has a better concentration score — meaning it’s more diversified — than its rival.

The funds hold just one of their top 10 holdings in common, but with very different weights. The China Construction Bank Corp. has the highest weighting in ROAM’s portfolio, at 1.1%. Meanwhile, the same company is the 10th largest holding in IEMG, with a weight of 0.71%. Taiwan Semiconductor Manufacturing has the highest weight in IEMG, at 5.29%, which perhaps explains why ROAM is less concentrated despite having a little more than one-tenth of the number of holdings.

In another key difference, IEMG affords weights greater than 4% to both China and Saudi Arabia, two markets not represented in ROAM’s portfolio (though it does have a 23% weighting in Hong Kong). Both also have struggled this year relative to ROAM’s performance.

Looking at annualized returns data, ROAM has outperformed IEMG over the two-, three-, four- and five-year periods. It’s also achieved this with lower volatility overall. Additionally, it has a dividend yield of 4.95% — more than twice that of IEMG.

Although it represents the same asset class, ROAM is a very different fund from IEMG. Its smart-beta strategy offers a different angle on the space, one not dominated by the stocks with the largest market capitalizations. That has proven to be an advantage in recent years.

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