A smart beta exchange traded fund, the WisdomTree International Hedged Quality Dividend Growth ETF (IHDG) debuted on 05/07/2014, and offers broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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 $641.18 M, this makes it one of the average sized ETFs in the Broad Developed World ETFs. IHDG is managed by Wisdomtree. Before fees and expenses, this particular fund 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
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
With one of the more expensive products in the space, this ETF has annual operating expenses of 0.58%.
IHDG's 12-month trailing dividend yield is 1.94%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Industria De Diseno Textil (ITX) accounts for about 4.80% of the fund's total assets, followed by British American Tobacco Plc (BATS) and Unilever Nv (UNA).
IHDG's top 10 holdings account for about 31.42% of its total assets under management.
Performance and Risk
So far this year, IHDG return is roughly 2.31%, and was up about 29.50% in the last one year (as of 01/24/2020). During this past 52-week period, the fund has traded between $29.43 and $37.50.
The ETF has a beta of 0.78 and standard deviation of 11.37% for the trailing three-year period, making it a medium risk choice in the space. With about 366 holdings, it effectively diversifies company-specific risk.
WisdomTree International Hedged Quality Dividend Growth ETF 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 Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $10.68 B in assets, Vanguard Dividend Appreciation ETF has $43.46 B. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.
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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WisdomTree International Hedged Quality Dividend Growth ETF (IHDG): ETF Research Reports
Vanguard Dividend Appreciation ETF (VIG): ETF Research Reports
iShares Core Dividend Growth ETF (DGRO): ETF Research Reports
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