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Asset Class: Diversified Emerging Markets
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Oldest ETF back tested: iShares MSCI Emerging Markets ETF (EEM)
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Correlation to U.S. Stock Market: 0.76
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Long-Term Performance: 9.58% CAGR
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S&P 500 Performance: 10.75% CAGR
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Back test timeframe: May 2003 – February 2022
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Number of ETFs available in this asset class: 81
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Number of ETFs in this asset class that are 10-years old or older: 23
EEM vs SPY: May 2003 – February 2022
EEM vs SPY: April 11, 2003 – March 2, 2022
The Deep Value ETF Accumulator rankings for the 23 oldest Diversified Emerging Markets ETFs:
The 4 top ranked Diversified Emerging Markets ETFs head-to-head comparisons:
FEMS vs DGS vs EWX vs DEM: March 2012 – February 2022
FEMS vs DGS vs EWX vs DEM: February 17, 2012 – March 2, 2022
Stated objectives of 4 top ranked Diversified Emerging Markets ETFs:
FEMS – The First Trust Emerging Markets Small Cap AlphaDEX® Fund is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before the Fund’s fees and expenses, of an equity index called the NASDAQ AlphaDEX® Emerging Markets Small Cap Index. The NASDAQ AlphaDEX® Emerging Markets Small Cap Index is an “enhanced” index created and administered by Nasdaq, Inc. (“Nasdaq”) which employs the AlphaDEX® stock selection methodology to select stocks from the NASDAQ Emerging Markets Index that meet certain criteria. To construct the Index, Nasdaq ranks the eligible stocks on growth factors including 3-, 6- and 12- month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets. All stocks are ranked on the sum of ranks for the growth factors and, separately, all stocks are ranked on the sum of ranks for the value factors. A stock must have data for all growth and/or value factors to receive a rank for that style. Each stock receives the best style rank from the previous step as its selection score.
The top 200 stocks based on the selection score determined in the previous step comprise the “selected stocks”. The selected stocks are divided into quintiles based on their rankings and the top ranked quintiles receive a higher weight within the index. The stocks are equally weighted within each quintile.
Each stock is then tested in order of its selection score rank to check if the weight assigned to that stock is outside the country/sector weighting constraints, which are set at 15% above the benchmark weight. If the weight assigned to the stock, when added with the weight assigned to all higher ranking stocks in its country/sector, is greater than the constraint, then the stock’s weight is lowered to the highest rank in the next quintile. Stocks previously lower in rank then move up one rank. Such stocks in the lowest quintile that violate a constraint are removed from the portfolio and replaced by the highest scoring stock not originally selected, subject to country/sector constraints. This process continues until all the country/sector weightings meet the constraint. The index is reconstituted and rebalanced semi-annually.
DGS – WisdomTree Emerging Markets SmallCap Dividend Fund seeks to track the investment results of dividend-paying small-cap companies in the emerging markets region. Gain exposure to small cap equity of emerging market dividend paying companies. Use to complement emerging market exposure accessing local economic growth and to satisfy demand for growth potential and income focus. The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of primarily small cap stocks selected from the WisdomTree Emerging Markets Dividend Index. Companies included in the Index fall within the bottom 10% of total market capitalization of the WisdomTree Emerging Markets Dividend Index as of the annual index measurement date. Companies are weighted in the Index based on annual cash dividends paid.
EWX – The SPDR® S&P® Emerging Markets Small Cap ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Emerging Markets Under USD2 Billion Index (the “Index”). Seeks to provide exposure to the small capitalization segment of emerging countries included in the S&P Global Broad Market Index. The selection universe includes all emerging country equites within the S&P Global BMI with market capitalizations between $100 million and $2 billion at the time of inclusion. The S&P® Emerging Markets Under USD2 Billion Index is a float-adjusted market capitalization weighted index designed to represent the small capitalization segment of emerging countries included in the S&P Global BMI (Broad Market Index). The S&P Global BMI is a rules-based index that measures global stock market performance. The Index is reconstituted annually. A country will be eligible for inclusion in the S&P Global BMI if it is classified as either a developed or emerging market by the S&P Global Equity Index Committee. Country classification is reviewed annually and determined based on quantitative criteria and feedback from market participants via a publicly available market consultation. All publicly listed companies with float-adjusted market capitalizations of at least $100 million and sufficient liquidity based on 12-month median value traded ratio and 6-month median daily value traded are included for each country. Once included, all current constituents with float-adjusted market capitalizations of at least $75 million and sufficient liquidity will remain in the S&P Global BMI for each country.
DEM – WisdomTree Emerging Markets High Dividend Fund seeks to track the investment results of high-dividend-yielding companies in the emerging markets region. Gain exposure to targeted emerging market all cap equity of high dividend yielding companies. Use to diversify income strategies or substitute for emerging market active and passive strategies. Use to satisfy demand for growth potential and income focus. The WisdomTree Emerging Markets High Dividend Index is a fundamentally weighted index that measures the performance of the highest dividend yielding stocks selected from the WisdomTree Emerging Markets Dividend Index. At the index measurement date, companies within the WisdomTree Emerging Markets Dividend Index are ranked by dividend yield. Securities ranking in the highest 30% by dividend yield are selected for inclusion. Companies are weighted in the Index based on annual cash dividends paid.
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Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator
Previous Deep Value ETF Accumulator articles on Diversified Emerging Markets ETFs:
4 Best Long-Term Performance Diversified Emerging Markets ETFs 1.4
Disclosure: We currently own shares of DGS & SPEM. We intend to sell our shares of DGS and buy shares of FEMS within the next 72 hours. I am not a professional investment advisor. Please perform your own due diligence or seek the advice of a Registered Investment Advisor before investing in any security mentioned in this article. This website contains affiliate links to M1 Finance and Google AdSense.