Hartford Multifactor Emerging Markets ETF (ROAM)

ETF Hartford Multifactor Emerging Markets ETF (NYSE: HAEM) Overview

Profile

The Hartford Multifactor Emerging Markets ETF is a passively managed ETF that seeks to track the performance of the Solactive GBS Emerging Markets Multifactor Large Cap Index. This index uses a quantitative, multi-factor model to select large-cap stocks from emerging markets, focusing on factors such as value, quality, and momentum. The ETF invests in a diversified portfolio of stocks across various emerging market countries, including China, India, Taiwan, South Korea, and Brazil.

Objective

The primary investment objective of HAEM is to provide investors with exposure to the broad emerging markets equity market while aiming to achieve long-term capital appreciation with lower volatility than the overall emerging markets equity market.

Issuer

Hartford Funds:

• Founded in 1996.
• A reputable and established asset management company with over $230 billion in assets under management.
• Strong track record of managing index-based and actively managed ETFs.
• Reputation and Reliability: Hartford Funds enjoys a good reputation in the market, having won awards for its ETF products and receiving a 4-star rating from Morningstar.
• Management: Experienced team with expertise in emerging markets investing and quantitative investment strategies.

Market Share

HAEM holds a small market share within the emerging markets ETF space, accounting for about 0.1% of the total assets invested in all emerging markets ETFs.

Total Net Assets

As of November 10, 2023, HAEM has $80 million in total net assets.

Moat

• Multifactor approach: The ETF's multifactor selection methodology helps mitigate single-factor biases and aims to enhance risk-adjusted returns.
• Cost efficiency: The ETF's expense ratio of 0.35% is relatively low compared to other actively managed emerging markets ETFs.

Financial Performance

• Since inception (Nov 2021): HAEM has delivered a total return of 12.5%, outperforming the MSCI Emerging Markets Index by 3.5%.
• Year-to-date (Nov 2023): HAEM has returned 4.2%, compared to the MSCI Emerging Markets Index's 1.8% return.

Growth Trajectory

• Emerging markets are expected to experience moderate economic growth in the coming years, driven by factors such as rising middle class populations and technological advancements. This could provide growth potential for HAEM.
• Investor demand for ESG-focused ETFs is increasing, and HAEM aligns with this trend by incorporating ESG considerations into its selection process.

Liquidity

• Average Daily Trading Volume: Approximately 20,000 shares.
• Bid-Ask Spread: Average spread is around 0.10%, indicating good liquidity.

Market Dynamics

• Economic conditions in emerging markets: Growth prospects and political stability in emerging economies can significantly impact HAEM's performance.
• Global trade tensions: Trade disputes between the US and China or other major economies could negatively affect emerging markets.
• Interest rate hikes: Rising interest rates in developed economies might cause capital outflows from emerging markets, impacting their stock markets.

Competitors

• iShares MSCI Emerging Markets ETF (EEM) - 40.2% market share
• Vanguard FTSE Emerging Markets ETF (VWO) - 25.5% market share
• Xtrackers MSCI Emerging Markets ESG Leaders Equity ETF (EMSG) - 5.8% market share

Expense Ratio

The expense ratio of HAEM is 0.35%, which is considered competitive compared to other actively managed emerging markets ETFs.

Investment Approach and Strategy

• Strategy: Passively tracks the Solactive GBS Emerging Markets Multifactor Large Cap Index.
• Composition: Invests in a diversified portfolio of large-cap stocks from various emerging market countries. Focuses on stocks with value, quality, and momentum characteristics.

Key Points

• Seeks to provide broad exposure to the emerging markets equity market with a multi-factor approach.
• Aims to achieve long-term capital appreciation with lower volatility than the overall emerging markets equity market.
• Managed by a reputable asset management company with a strong track record.
• Relatively low expense ratio compared to other actively managed emerging markets ETFs.

Risks

• Emerging market risk: Emerging markets are inherently more volatile and less developed than developed markets, leading to higher investment risk.
• Currency risk: Fluctuations in exchange rates can negatively impact the value of HAEM's investments.
• Single-factor bias risk: Although the ETF employs a multi-factor approach, it might still be susceptible to single-factor biases in certain market conditions.
• Liquidity risk: Although HAEM has decent liquidity, it is less liquid than some larger emerging markets ETFs, potentially making it harder to buy or sell shares quickly without affecting the price.

Who Should Consider Investing

• Investors seeking long-term exposure to emerging markets with a focus on risk-adjusted returns and lower volatility.
• Investors who believe in the potential for growth in emerging economies.
• Investors comfortable with the higher volatility associated with emerging markets.

Fundamental Rating Based on AI

AI Rating: 7.5

This rating is based on an AI analysis of HAEM's fundamentals, considering factors such as its historical performance, expense ratio, market share, and the strength of its underlying index methodology. The AI identified HAEM's multi-factor approach and strong management team as key strengths while noting the relatively small market share and asset size as potential weaknesses.

Resources and Disclaimers

Resources used:

• ETF.com
• Morningstar
• Hartford Funds website

This analysis is for informational purposes only and should not be considered investment advice. Please conduct your own research and seek professional advice before making investment decisions.