Making its debut on 10/30/2007, smart beta exchange traded fund WisdomTree Emerging Markets SmallCap Dividend ETF (DGS) provides investors broad exposure to the Broad Emerging Market ETFs category of the 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
DGS is managed by Wisdomtree, and this fund has amassed over $1.71 billion, which makes it one of the larger ETFs in the Broad Emerging Market ETFs. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree Emerging Markets SmallCap Dividend Index.
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.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for DGS are 0.58%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 3.34%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Old Mutual Ltd (OMU) accounts for about 0.96% of the fund's total assets, followed by Mr Price Group Ltd (MPC) and Tisco Financial Group Pcl - Nvdr (TISCO-R).
DGS's top 10 holdings account for about 7.23% of its total assets under management.
Performance and Risk
The ETF has added roughly 0.72% so far this year and it's up approximately 3.82% in the last one year (as of 02/11/2025). In the past 52-week period, it has traded between $47.40 and $54.37.
The fund has a beta of 0.78 and standard deviation of 14.51% for the trailing three-year period, which makes DGS a medium risk choice in this particular space. With about 1105 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree Emerging Markets SmallCap Dividend ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $80.69 billion in assets, Vanguard FTSE Emerging Markets ETF has $81.50 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs.
Bottom Line
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iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports
Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
