Emerging markets (EMs) can be a tricky endeavor, which is where adding a factor filter over EM investments can help. But which investment factor to go with? ETF investors can get four factors in one fund via the iShares MSCI Emerging Markets Multifactor ETF (EMGF).

The fund seeks to track the investment results of the MSCI Emerging Markets Diversified Multiple-Factor Index. EMGF generally will invest at least 90% of its assets in the component securities of the underlying index and in investments that have economic characteristics that are substantially identical to the component securities of the underlying index.

The underlying index is designed to select equity securities from the MSCI Emerging Markets Index that have high exposure to four investment style factors: value, quality, momentum, and low size, while maintaining a level of risk similar to that of the parent index.

EMGF offers investors:

  1. Maximum exposure to factors that have historically outperformed the broad market, while maintaining a similar level of market risk.
  2. Focus on drivers of emerging market equity performance: inexpensive stocks, financially healthy firms, trending stocks, and relatively low market cap companies.
  3. Use to diversify through international exposure.
  4. A yearly return of over 63%.

EMGF Chart

Large and In Charge

Cost relative to performance is an ongoing theme when it comes to ETF investing. EMGF offers investors exposure to one of the biggest EM funds at a 0.45% expense ratio, which is eight basis points less than its category average.

“The fund is managed by Blackrock, and has been able to amass over $723.81 million, which makes it one of the larger ETFs in the Broad Emerging Market ETFs,” a Zacks Equity Research article published in Nasdaq explained. “This particular fund, before fees and expenses, seeks to match the performance of the MSCI Emerging Markets Diversified Multiple-Factor Index.”

“The MSCI Emerging Markets Diversified Multiple Factor Index is composed of stocks of large and mid-capitalization companies in emerging markets that have favourable exposure to target style factors subject to constraints,” the article added further.

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