Trend: WisdomTree continues to innovate in the ETF marketplace with the WisdomTree Emerging Markets SmallCap Fund (DGS).
David Levy at Seeking Alpha describes the first exchange-traded fund with exposure to small-cap emerging market stocks — WisdomTree Emerging Markets SmallCap Fund (DGS)—, which begins trading on Oct 31. Excerpts below.
The fund has strong performance (based on back-tested data provided by WisdomTree) over the last one-, three- and five-year periods, outperforming both the MSCI Emerging Markets and the MSCI EAFE (international developed markets) indexes during the same timeframe. Year-to-date through Sept. 30, the back-tested index returned 36.71 percent; equally impressive are the one year return (63.26%), three year return (+40% annualized), and five year return (+43% annualized).
The fund complements WisdomTree’s line-up of fundamentally weighted indexes, and holdings are weighted based on annual cash dividends paid. While some fundamental measures vary from country to country, this metric appears to be the best way to compare fundamental metrics across broad geographic regions.
The fund’s volatility (measured in the chart above using downside deviation) is on par with WisdomTree’s other emerging market fund, but outpaces all of the other international funds and is nearly two times the level of the S&P 500. This serves as fair warning to the risky nature of investing in emerging markets.
The new international small-cap ETF is highly diversified by both country and sector. It contains 369 holdings and sports an impressive dividend yield of 4.82 percent. The countries with the highest allocations are Taiwan (24 percent), South Africa (13 percent), Korea (12 percent) and Thailand (11.5 percent). The sectors with the highest weightings are industrials (24 percent), consumer discretionary (18 percent), financials (14 percent) and materials (13 percent).
Disclosure: We may hold positions in any ETF mentioned at any time.