The Schwab Fundamental Emerging Markets Equity ETF (FNDE) made its debut on 08/13/2013, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
If you’re the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking 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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Managed by Charles Schwab, FNDE has amassed assets over $6.25 billion, making it one of the largest ETFs in the Broad Emerging Market ETFs. FNDE seeks to match the performance of the Russell RAFI Emerging Markets Large Co. Index (Net) before fees and expenses.
The RAFI Fundamental High Liquidity Emerging Markets Index measures the performance of large sized companies, based on their fundamental size and weight, in emerging market countries.
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.
Operating expenses on an annual basis are 0.39% for FNDE, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.75%.
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, Taiwan Semiconductor Manufacturing accounts for about 5.47% of the fund’s total assets, followed by Hon Hai Precision Industry Ltd and China Construction Bank Corp H.
