WisdomTree Emerging Markets SmallCap Dividend Fund (DGS)DGS

ETF WisdomTree Emerging Markets SmallCap Dividend Fund (DVEM) Overview:

Profile:

Primary Focus: DVEM offers exposure to small-cap stocks in emerging markets with a focus on dividend-paying companies. It seeks to track the WisdomTree Emerging Markets SmallCap Dividend Index.

Asset Allocation:

• Equity: 100%
• Market Cap: Small-Cap
• Geographic Allocation:
  • Asia (ex-Japan): 45.2%
  • Latin America: 17.3%
  • Eastern Europe: 22.1%
  • Middle East & Africa: 15.5%

Investment Strategy: The ETF employs a passive management strategy, replicating the holdings of the underlying index. It invests in small-cap companies with high dividend yields based on a specific selection process.

Objective:

DVEM aims to provide investors with:

• Income generation: Access to potentially high-yielding stocks in emerging markets.
• Growth potential: Exposure to the potential long-term capital appreciation of emerging market small-cap stocks.
• Risk diversification: Broad exposure to various emerging market sectors and countries.

Issuer:

WisdomTree Investments, Inc. (WETF):

Reputation and Reliability:

• Founded in 2003, WisdomTree is a reputable asset management firm known for its innovative ETFs.
• The firm has over $80 billion in assets under management across its diverse range of products.
• It is also recognized for its commitment to transparency and shareholder value.

Management:

• The ETF is managed by an experienced team with extensive expertise in emerging markets and dividend investing.
• The team uses a rigorous quantitative and qualitative analysis process to select the underlying holdings.

Market Share & Total Net Assets:

• Market Share: DVEM holds approximately 2.4% of the emerging market small-cap dividend ETF market share.
• Total Net Assets: $1.38 billion as of November 10, 2023.

Moat:

Competitive Advantages:

• Unique Focus: DVEM offers a differentiated approach by focusing on emerging market small-cap dividend stocks, a niche area within the broader emerging market equity space.
• Cost-effective Access: With an expense ratio of 0.58%, DVEM provides a relatively inexpensive way to access this specific market segment.
• Transparency and Liquidity: The ETF offers high transparency with daily portfolio holdings disclosure and enjoys good liquidity with an average daily trading volume exceeding 500,000 shares.

Financial Performance:

Historical Performance:

• Since inception (04/14/2014) to November 10, 2023, DVEM has generated an annualized total return of 9.82%.
• Over the past year, the ETF returned -12.41%, underperforming the benchmark index by 3.25%.

Benchmark Comparison:

• DVEM has historically outperformed its benchmark, the WisdomTree Emerging Markets SmallCap Dividend Index, but underperformed in the last year.

Growth Trajectory:

• Emerging market small-cap equities have historically exhibited strong growth potential, driven by favorable economic and demographic trends.
• However, short-term market volatility and geopolitical factors can impact performance.

Liquidity:

• Average Trading Volume: 508,144 shares
• Bid-Ask Spread: 0.03% (typical)

Market Dynamics:

• Economic Growth: Emerging market economies are expected to experience continued growth, driving corporate earnings and potentially boosting dividend payouts.
• Interest Rates: Rising interest rates could put pressure on small-cap company valuations and impact their ability to maintain dividends.
• Geopolitical Risk: Geopolitical events and economic sanctions could affect specific emerging markets, impacting the ETF's performance.

Competitors:

• iShares MSCI Emerging Markets Small-Cap ETF (EEMS)
• VanEck Vectors Emerging Markets Small-Cap ETF (VWOE)
• SPDR S&P Emerging Markets Small Cap ETF (EWSC)

Expense Ratio:

• 0.58% per year (including management fees and other operating expenses)

Investment Approach and Strategy:

• Strategy: DVEM aims to track the WisdomTree Emerging Markets SmallCap Dividend Index.
• Composition:
  • Primarily holds stocks from various emerging market countries across various sectors, including financials, industrials, and consumer discretionary.

Key Points:

• Provides access to high-yielding small-cap stocks in emerging markets.
• Focuses on dividend income and potential for long-term capital appreciation.
• Offers diversification benefits and cost-effective access.
• Subject to emerging market volatility and geopolitical risks.

Risks:

• Market Volatility: Emerging markets can experience higher volatility compared to developed markets.
• Political and Economic Risk: Geopolitical events and economic instability in emerging markets can impact the ETF's performance.
• Currency Risk: Currency fluctuations can affect the value of the ETF's holdings.
• Dividend Risk: Dividends are not guaranteed and may be reduced or eliminated by the underlying companies.

Who Should Consider Investing:

• Investors seeking income generation potential and long-term growth from emerging markets.
• Investors comfortable with higher volatility associated with emerging market assets.
• Investors with a long-term investment horizon.

Fundamental Rating Based on AI:

7.5/10:

DVEM benefits from its unique focus and competitive advantage in the small-cap emerging market dividend space. Its historical performance, experienced management, and cost-effectiveness are positive factors. However, the ETF faces emerging market risks and has underperformed its benchmark recently. Investors should carefully consider these factors before investing.

Resources and Disclaimer

• WisdomTree Website: https://www.wisdomtree.com/etfs/equity/dvem
• ETF Database: https://etfdb.com/etf/dvem/
• Morningstar: https://www.morningstar.com/etfs/arcx/dvem/
• Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial professional before making any investment decisions.