Investors looking for ways to emphasize multiple investment factors with emerging markets equities have several exchange traded funds to consider. One of the more interesting members of that group is the Deutsche X-trackers FTSE Emerging Comprehensive Factor ETF (NYSEArca: DEMG).
DEMG tracks the FTSE Emerging Comprehensive Factor Index, which “is designed to provide core exposure to emerging market equities based on five factors – Quality, Value, Momentum, Low Volatility and Size,” according to Deutsche Asset Management.
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.
With the various factors out there, which can define equities across across various parameters, individual stocks can exhibit multiple features. Consequently, investors may have the best of both worlds, gaining exposure to two or more factors for the price of one investment.
Valuing high quality value is particularly important as bull markets enter their waning stages, as some market observers believe the current bull market is doing. In the early stages of bull markets, lower quality companies see their shares soar. However, as the bull matures, investors often exhibit a preference for higher quality fare with more compelling valuations. DEMG is up about 3.3% year-to-date.