Making its debut on 05/07/2014, smart beta exchange traded fund WisdomTree International Hedged Quality Dividend Growth Fund (IHDG) provides investors broad exposure to the Broad Developed World ETFs category of the U.S. equity market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
Because the fund has amassed over $578.10 M, this makes it one of the average sized ETFs in the Broad Developed World ETFs. IHDG is managed by Wisdomtree. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree International Hedged Quality Dividend Growth Index.
The WisdomTree International Hedged Quality Dividend Growth Index is designed to provide exposure to the developed market companies while at the same time neutralizing exposure to fluctuations between the value of foreign currencies and the U.S. dollar.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.58% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.54%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Roche Holding Ag (ROG SW) accounts for about 5.06% of the fund's total assets, followed by Novo Nordisk A/s (NOVOB DC) and Unilever Nv (UNA NA).
Its top 10 holdings account for approximately 33.72% of IHDG's total assets under management.
Performance and Risk
So far this year, the ETF has gained about 1.93%, and is up about 7.88% in the last one year (as of 05/16/2018). IHDG has traded between $29.37 and $32.81 in the past 52-week period.
IHDG has a beta of 0.70 and standard deviation of 14.42% for the trailing three-year period, which makes the fund a medium choice in the space. With about 231 holdings, it effectively diversifies company-specific risk.
WisdomTree International Hedged Quality Dividend Growth Fund is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core MSCI EAFE ETF (IEFA) tracks MSCI EAFE Investable Market Index and the iShares MSCI EAFE ETF (EFA) tracks MSCI EAFE Index. IShares Core MSCI EAFE ETF has $59.18 B in assets, iShares MSCI EAFE ETF has $78.80 B. IEFA has an expense ratio of 0.08% and EFA charges 0.32%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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EMG MKT FREE AS (EFA): ETF Research Reports
WISTR-INT HDG (IHDG): ETF Research Reports
ISHARS-CR MS EA (IEFA): ETF Research Reports
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