I am a worldwide investor. Some may even say that I am an opportunistic worldwide investor. If you have considered dedicating a portion of your portfolio to nations located in the Pacific/Asia region, you should consider the investment opportunities that are held in the iShares MSCI Pacific ex Japan ETF (EPP). This fund has many things going for it, including:
- Excellent long-term track record. 10.34% CAGR (compound annual growth rate) from November 2001 through July 2018
- Great dividend payer. 4.47% twelve-month trailing yield
- Exposure to Australia, Hong Kong, Singapore and New Zealand
- Broadly diversified fund. 180 large & mid-cap companies. A blend of growth and value companies.
EPP vs SPY, November 2001 – July 2018
Source: https://www.portfoliovisualizer.com/
The chart above is the reason I first became interested in this ETF. This chart screams opportunity to me. As you can see, from November 2001 through July 2018, EPP had a compounded rate of return of 10.34%, while an S&P 500 index fund compounded at 8.09%. We all know that past performance does not guarantee future results. That is very true, but we do need some context from the past to make intelligent investment decisions today. History shows that EPP has the potential of positive returns in the future and possibly even some additional alpha above our U.S. Large Cap Blend holdings. Also, worth noting from this chart is the correlation to US Markets; it is 0.80. As a worldwide investor, it is of great value to find and invest in an asset that has had positive long-term returns and has a relatively low correlation to the other assets in my portfolio.
Below is a similar back-test chart of EPP vs SPY using the tools available at KoyFin:
Source: https://www.koyfin.com/home
In addition to great long-term investment returns in this ETF, EPP also provides a very appealing dividend. The current dividend yield is 4.19% and the trailing 12-month dividend was 4.47%. Personally, I do not invest specifically for dividends, but I know many who do. For this reason, dividend investors who have a worldwide equity portfolio may want to consider an allocation of their portfolio to this Pacific/Asia region fund. Below is a chart depicting the dividend income of a $10,000 investment in EPP vs SPY over the last 17 years:
Source: https://www.portfoliovisualizer.com/
Now, let’s look at what you get if you invest in the iShares MSCI Pacific ex Japan ETF (EPP). The iShares website gives the following description of this fund: The iShares MSCI Pacific ex Japan ETF seeks to track the investment results of an index composed of Pacific region developed market equities, excluding Japan. Exposure to companies in Australia, Hong Kong, New Zealand, and Singapore. Targeted access to a specific subset of Asia Pacific stocks. Use to diversify internationally and express a regional view.
EPP currently has the following country weightings:
- Australia – 58.09%
- Hong Kong – 29.23%
- Singapore – 10.31%
- New Zealand – 1.72%
The current sector weightings of EPP are:
- Financials – 38.14%
- Real Estate – 13.38%
- Materials – 10.26%
- Industrials – 8.36%
- Consumer Staples – 6.14%
- Health Care – 6.08%
- Consumer Discretionary – 5.63%
- Utilities – 4.59%
- Energy – 3.41%
- Telecommunications – 2.40%
- Information Technology – 0.97%
The top 10 holdings in EPP are:
Source: https://www.ishares.com/us/products/239674/ishares-msci-pacific-ex-japan-etf
More key facts to know about the iShares MSCI Pacific ex Japan ETF (EPP):
- Expense Ratio: 0.49%
- Inception Date: October 25, 2001
- AUM: $2.4 Billion
- Average Volume: 318,373 share/day
- Holdings: 147
- P/E Ratio: 13.95%
- P/B Ratio: 1.67%
- Distribution Yield: 4.19%
- 12-Month Trailing Yield: 4.47%
- Morningstar Style Box attributes: Large Cap Blend
In conclusion, I believe the iShares MSCI Pacific ex Japan ETF (EPP) is well suited for all investors who maintain broadly diversified worldwide equity portfolios. It produces a great dividend for income investors and it has great potential for those seeking growth of their assets.
Thank you for taking time to read this article. If you found it useful, please share it with a friend.
Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Disclosure: I own shares of EPP and intend to buy more in the future. I am not a professional investment advisor. Please perform your own due diligence or seek the advice of a Registered Investment Advisor prior to investing in any fund mentioned in this article.