That strategy gives DEMG an extra layer to potentially benefit investors because most multi-factor ETFs provide exposure to three or four investment factors.
DEMG holds just over 800 stocks and its largest country weight is 18.5% to China, significantly less than the China exposure found in the MSCI Emerging Markets Index. DEMG allocates a combined 28% of its weight to Taiwan and South Africa.
Emerging markets equities still trade at a discounts relative to U.S. benchmarks, but the utility of the quality factor in the developing world cannot be understated. Historically, when emerging markets stocks decline, it is lower quality names driving those declines. DEMG’s emphasis on quality can help investors capture emerging markets upside while potentially limiting downside.
DEMG allocates a combined 26.6% of its weight to industrial and financial services stocks. The ETF’s 10% weight to the energy sector could be interesting heading into 2018 as emerging markets energy stocks are trading at steep discounts to their long-term averages.
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