Emerging Markets Small Cap Value

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gtwhitegold
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Emerging Markets Small Cap Value

Post by gtwhitegold »

Looking for some guidance here and thanks in advance.

Since I don't have access to DFA and I don't like the fundamentals of the available EM SC ETFs, specifically, DGS, EEMS and EWX. I am looking for a different EM SCV mutual fund.

The only one that I have seen that is really value oriented is rather expensive. That being Allianz's ALAIX. The fund would hopefully have a low entry cost and a strong value and small tilt.

My expected initial investment is $10000.

Any help is appreciated.
Angst
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Re: Emerging Markets Small Cap Value

Post by Angst »

This would be a good place to start:

https://www.google.com/search?sitesearc ... eheads.org
livesoft
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Re: Emerging Markets Small Cap Value

Post by livesoft »

Not a lot to choose from, especially when you have rejected some good choices. I always look what Eric Haas has to say when looking for a fund in a specific asset class.

http://altruistfa.com/emergingmktssmall%20funds.htm

I own DGS and EWX.
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gtwhitegold
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Re: Emerging Markets Small Cap Value

Post by gtwhitegold »

Angst,

I normally do that and GTS before I post any questions. It looks like all of the EM SC mutual funds have a pretty high expense ratio and a vast majority have a pretty substantial growth tilt.

Livesoft,

Thanks, I am using FEMS now, but after the change in index, it has less of a value tilt than it did before. I was looking forward to the index change because I thought that they would begin to include South Korea, but it doesn't hold any South Korean stocks even though Nasdaq includes South Korea as an Emerging Market in its regular indices.

I was hoping that Blackrock would release an iShares Emerging Markets Small Cap Fund similar to the iShares Enhanced US and Developed funds.
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Re: Emerging Markets Small Cap Value

Post by oldcomputerguy »

gtwhitegold wrote: I was hoping that Blackrock would release an iShares Emerging Markets Small Cap Fund similar to the iShares Enhanced US and Developed funds.
If you're looking for emerging markets small-cap there's EEMS. Pickings are mighty slim in the international SCV arena.
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Re: Emerging Markets Small Cap Value

Post by Angst »

gtwhitegold wrote:Angst,

I normally do that and GTS before I post any questions. It looks like all of the EM SC mutual funds have a pretty high expense ratio and a vast majority have a pretty substantial growth tilt.
Sorry, I guess I just thought I didn't have a lot to offer though. I too limit myself to DGS and EWX, and I'm not totally thrilled with them either, but I haven't used FEMS. Just looking now, it's more expensive and holds a fairly small number of companies, although I have no problem with it excluding South Korea from "emerging markets". EWX excludes it too, although DGS doesn't; nonetheless, I hold both of these and tax loss harvest btw the two of them without giving it a lot of thought. I'm not sure why I haven't included EEMS in the mix; maybe no good reason not to. I might also mention that the majority of my SC Int'l is lumped into Vanguard's VSS. Perhaps the likes of PXH or FNDE would interest you, even though they're large cap EM. Best of luck.
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Re: Emerging Markets Small Cap Value

Post by grabiner »

You can also overweight small-cap emerging markets (but not value) without a separate ETF, by using Vanguard's funds for small-cap international (which includes EM) and emerging markets (which includes small-cap). For example, if you work for the US Government and your international holdings are 30% I fund (large-cap developed), 30% Vanguard FTSE All-World Ex-US Small-Cap (which is 25% emerging), 40% Emerging Markets Index (which is 15% small), you hold EM small-cap as 13.5% of your international holdings, compared to the market weight of 3.75%.
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Re: Emerging Markets Small Cap Value

Post by grap0013 »

My two favorite EM SCV funds are DGS and EEMS. I like some EM LCV too though and I would not exclude it. Too much tracking error with EWX and I think their index construction or trading policies may have some deficiencies. EM is a hard space due to country weightings, cap vs. value, etc.... Therefore, I think you need to spread the love around here to minimize regrets. I own similar percentages of DFCEX, DGS, SFENX, and QEELX. YTD the spread from best to worst returns is over 6%. Don't pick one horse in this race.
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Re: Emerging Markets Small Cap Value

Post by Angst »

grap, I second your logic and follow it, to a fair degree, with the likes of PXH, FNDE, EWX and DGS, not to mention the EM contributions of my more primary holdings in VEMAX, VSS and VTIAX

btw, I just now learned that DGS more than doubled its China % in Wisdom Tree's annual 2015 rebalancing:
viewtopic.php?f=1&t=186054&newpost=2822964

I can imagine this was already known by others, but I seem to have missed it. Not that I'm going to change anything for the moment.
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Re: Emerging Markets Small Cap Value

Post by gtwhitegold »

I have used EEMS in the past for EMSC, but I'm trying to have a more focused quantitative portfolio. Right now, I'm using QEELX/QEENX for EMLC.

The reason that I had mentioned South Korea is that I would prefer to have similar country exposures in the funds that I invest in. This is a similar problem that I have with Canada. I'm not going to add a fund just to have more exposure to Canada or South Korea, so I'll just have to accept it for the time being.
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Re: Emerging Markets Small Cap Value

Post by rustymutt »

You can consider EEMS, and/or EWX. I recently switched to EWX, because it's paying out better dividends, and in this low interest environment, I want better dividends.
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Re: Emerging Markets Small Cap Value

Post by grabiner »

rustymutt wrote:You can consider EEMS, and/or EWX. I recently switched to EWX, because it's paying out better dividends, and in this low interest environment, I want better dividends.
Taxable or tax-deferred account? I do not recommend EWX for a taxable account. That high dividend yield has a lot of non-qualified dividends, and the ETF has distributed a lot of capital gains, so you don't get to keep as much of the fund return. (I learned this the hard way, and sold EWX for EEMS after it distributed too many gains.)
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Re: Emerging Markets Small Cap Value

Post by rustymutt »

grabiner wrote:
rustymutt wrote:You can consider EEMS, and/or EWX. I recently switched to EWX, because it's paying out better dividends, and in this low interest environment, I want better dividends.
Taxable or tax-deferred account? I do not recommend EWX for a taxable account. That high dividend yield has a lot of non-qualified dividends, and the ETF has distributed a lot of capital gains, so you don't get to keep as much of the fund return. (I learned this the hard way, and sold EWX for EEMS after it distributed too many gains.)
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

Can someone please educate me why EWX is referred to as EM SCV in most posts on this forum? Per home page of the fund https://www.spdrs.com/product/fund.seam?ticker=EWX , it follows the "S&P Emerging Markets Under USD2 Billion Index". It says "The S&P Emerging Markets Under USD2 Billion Index is a float adjusted market cap weighted index."
Unfortunately I am not skilled enough to intelligently analyze funds for factor loadings. On the portfoliovisualizer web site I am unable to select EM as "Stock Market Area", if that is supposed to be the market that the factor loadings are determined against.
In viewtopic.php?f=10&t=157626&p=2365266 somebody commented: "EWX is much smaller with a lower P/B ratio (at least for the moment) [compared to DGS]...". DGS is supposed to track a dividend strategy, which is a proxy for a "value" weighting. So how can the market be more "value-y" than a value tilted fund?
EWX is also repeatedly mentioned in this thread ("Emerging Markets Small Cap Value").
Per definition of the ETF, it follows a market cap weighted index - so how can it have a value factor loading?

Similarly, grap0013 notes above in this thread: "My two favorite EM SCV funds are DGS and EEMS." But EEMS tracks the "MSCI Emerging Markets Small Cap Index", which is a market cap based index. My understanding was that market cap based indexes have no factor loadings by definition.

Please help me understanding what I am missing with this logic. I am desperately looking for an EM SCV fund, and am unable to find any. Research papers have shown that some factor returns are particularly high in EM small cap, and who knows if factor premiums still exist in the U.S. with gazillions of new ETFs and hedge funds by just about every fund family and quant shop chasing the same SCV stocks and trying to exploit almost identical quantitative strategies. I would like to diversify my "factor premium" bets by including EM SCV.
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Re: Emerging Markets Small Cap Value

Post by rustymutt »

I switched to EWX 2 years ago from EEMS. At the time I was looking for yield, and after some considerations, EWX was the choice for me. It's 6% of my portfolio weight. And for the last 2 years, it's worked out well for me. I felt it's factor load was more inline with my inclinations toward risk/reward, and the theories, that in the past panned out. I'm at 4% year to date overall. Remember to think long term when making smart investment choices. :happy
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Re: Emerging Markets Small Cap Value

Post by Oliver »

Given the various definitions of emerging markets, I am not surprised that portfoliovisualizer is not useful in this case. Morningstar is a good starting point http://portfolios.morningstar.com/fund/ ... ture=en_US

PS Morningstar is not very useful if the fund is using a multi factor model to choose stocks.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

rustymutt wrote:I switched to EWX 2 years ago from EEMS. At the time I was looking for yield, and after some considerations, EWX was the choice for me. It's 6% of my portfolio weight. And for the last 2 years, it's worked out well for me. I felt it's factor load was more inline with my inclinations toward risk/reward, and the theories, that in the past panned out. I'm at 4% year to date overall. Remember to think long term when making smart investment choices. :happy
EWX is a market cap based index fund, recieves the dividends of the market, and pays distributions of dividends and cap gains as required by law. Fund shares can also be bought and sold at will at any time depending on the liquidity needs of the investor. I have a hard time understanding how "yield" can possibly deserve any consideration for an investment decision. As a market cap based index fund, what are its factor loads other than the market factor?
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Re: Emerging Markets Small Cap Value

Post by rustymutt »

comeinvest wrote:
rustymutt wrote:I switched to EWX 2 years ago from EEMS. At the time I was looking for yield, and after some considerations, EWX was the choice for me. It's 6% of my portfolio weight. And for the last 2 years, it's worked out well for me. I felt it's factor load was more inline with my inclinations toward risk/reward, and the theories, that in the past panned out. I'm at 4% year to date overall. Remember to think long term when making smart investment choices. :happy
EWX is a market cap based index fund, recieves the dividends of the market, and pays distributions of dividends and cap gains as required by law. Fund shares can also be bought and sold at will at any time depending on the liquidity needs of the investor. I have a hard time understanding how "yield" can possibly deserve any consideration for an investment decision. As a market cap based index fund, what are its factor loads other than the market factor?
What's wrong with market factors? You don't feel they play a role in investing? Maybe I don't understand you.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

rustymutt wrote:
comeinvest wrote:
rustymutt wrote:I switched to EWX 2 years ago from EEMS. At the time I was looking for yield, and after some considerations, EWX was the choice for me. It's 6% of my portfolio weight. And for the last 2 years, it's worked out well for me. I felt it's factor load was more inline with my inclinations toward risk/reward, and the theories, that in the past panned out. I'm at 4% year to date overall. Remember to think long term when making smart investment choices. :happy
EWX is a market cap based index fund, recieves the dividends of the market, and pays distributions of dividends and cap gains as required by law. Fund shares can also be bought and sold at will at any time depending on the liquidity needs of the investor. I have a hard time understanding how "yield" can possibly deserve any consideration for an investment decision. As a market cap based index fund, what are its factor loads other than the market factor?
What's wrong with market factors? You don't feel they play a role in investing? Maybe I don't understand you.
My understanding is that this fund tracks the EM small cap market. No factor investing, factor premiums or tilts. As I asked in my post further up in this thread, I'd be glad if someone can educate me why most posts in this forum imply that it may be a small cap value fund.

On another note, NAV underperformed the index by 0.85% annually since inception. Not too bad given that the ER is 0.65%. Turnover rate is a low 12.00% per Morningstar, which makes sense as it's an cap based index fund. However, it is not a multi-factor fund, which means all the small cap junk is included that factor tilted funds try to eliminate.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

gtwhitegold wrote:Angst,

I normally do that and GTS before I post any questions. It looks like all of the EM SC mutual funds have a pretty high expense ratio and a vast majority have a pretty substantial growth tilt.

Livesoft,

Thanks, I am using FEMS now, but after the change in index, it has less of a value tilt than it did before. I was looking forward to the index change because I thought that they would begin to include South Korea, but it doesn't hold any South Korean stocks even though Nasdaq includes South Korea as an Emerging Market in its regular indices.

I was hoping that Blackrock would release an iShares Emerging Markets Small Cap Fund similar to the iShares Enhanced US and Developed funds.

I was wondering what the bogleheads think of FEMS.
Per their index definiton, http://www.ftportfolios.com/retail/etf/ ... icker=FEMS, "To construct the Index, Nasdaq ranks the eligible stocks on growth factors including 3-, 6- and 12- month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets." ..
The growth and value criteria seem conflicting to me. What are the effective factor weightings?
Turnover rate is 151.00%, and the fund underperformed its own index that it tries to track by ca. 3% in a year.
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Re: Emerging Markets Small Cap Value

Post by matt4109 »

Just to give my perspective on this, I've settled on SCHE for my EM SCV. It's not strictly small cap or value, but it's pretty close, and the expense ratio is .14% instead of .67%. I was tempted to shift to EEMS at some point since it has the highest small value loading factors in portfoliovisualizer, but the expense ratio is just too high for me in the end, while SCHE is really not that far off from it.

comeinvest - the stock market area I use in portfoliovisualizer is Asia Ex Japan. It results in a better correlation coefficient than any of the other selections, probably because most EM stocks are located there. It still only is around .85 - .90 for most of them though, which makes me even more confident that going for a lower expense ratio is a better idea than chasing the best SCV loading factors.
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Re: Emerging Markets Small Cap Value

Post by azanon »

I use GVAL, which is 0.69%, deep value, and in the "small/mid international" category. It's not a pure EM fund (currently about 50% EM), but it definitely has some healthy positions in some very sketchy countries, that overall, has it well in the EM category in my opinion.

Rough guide:

1. Cheap 2. International Small/Value Fund/ETF

> Directions: Pick any one of the two choices above.
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Re: Emerging Markets Small Cap Value

Post by Kenster1 »

I wish there were a good EMV option with emphasis in the Midcap space - that would be a sweeter spot for me - or perhaps an all-cap EMV fund with heavier emphasis on Midcaps rather than the big megacaps typical of a market-weighted fund (....oh I just described the DFA All-cap funds :)).

The EMV in Smallcap space is just too risky and volatile --- let me repeat, we're talking about small companies in emerging markets and then adding a value-tilt which includes the more distressed companies. Personally I prefer more emphasis in going a big bigger with Midcaps - but none really focuses on that.

Otherwise - the best bet for me is to just focus on EMV all-cap.

The Value and Size Effects in Emerging Markets
http://www.advisoryresearch.com/wp-cont ... e-2014.pdf
Twenty years ago, emerging markets represented 19% of global GDP compared to 36%
today and this is generally expected to increase in the future as forecasted growth in
emerging markets outpaces traditional developed markets. The value effect is supported
by the BGLR paper (1985-2000), Rouwenhorst paper (1982-1997), CFT paper (1990-
2011), and the DMS paper (2000-2013) – all which arrive at a similar conclusion that the
value effect exists in emerging markets and is at least as significant as in more developed
markets and most likely larger. The value effect works in the majority of emerging market
countries, frontier markets, and even works when investing at a country level (picking
countries based on value characteristics), providing compelling support for the value effect.

However, for the size effect, the evidence is much less persuasive. It may exist if one
includes outliers or assumes segmented markets and analyzes stocks within their own
country. However the more recent papers do not find a statistically significant difference
between small and large cap stocks or if one exists it is smaller than in developed markets.
The usual explanation that small cap stocks should earn higher returns due to their lower
liquidity vs large cap stocks also does not appear to hold up as Rouwenhorst shows. Thus
for investors, an all cap or opportunistic portfolio may be the best solution when investing
in emerging markets.
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Re: Emerging Markets Small Cap Value

Post by Kenster1 »

There's also iShares Edge MSCI Multifactor Emerging Markets ETF (EMGF)

But it focuses on Large + Midcaps. It's more balanced across Large + Midcaps versus the Large-cap heavy market-cap weighted EM indexes.
And it has a bit of a value-tilt versus the index.
Focus on drivers of emerging market equity performance: inexpensive stocks, financially healthy firms, trending stocks and relatively low market cap companies
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

matt4109 wrote:Just to give my perspective on this, I've settled on SCHE for my EM SCV. It's not strictly small cap or value, but it's pretty close, and the expense ratio is .14% instead of .67%. I was tempted to shift to EEMS at some point since it has the highest small value loading factors in portfoliovisualizer, but the expense ratio is just too high for me in the end, while SCHE is really not that far off from it.

comeinvest - the stock market area I use in portfoliovisualizer is Asia Ex Japan. It results in a better correlation coefficient than any of the other selections, probably because most EM stocks are located there. It still only is around .85 - .90 for most of them though, which makes me even more confident that going for a lower expense ratio is a better idea than chasing the best SCV loading factors.
SCHE is a market cap based EM index fund. From reading Schwab's fund description or Morningstar data, it has nothing, but absolutely nothing in common with either small cap or value tilt - not even one of those two things. No offense, but it appears that many bogleheads are misinterpreting or overusing portfoliovisualizer. It would appear to me that this tool is not designed to be used for EM funds as there are no suitable index data built in. Most EM funds show as "value" funds although they are market cap weighted with zero tilt, just because EM are cheap.
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Re: Emerging Markets Small Cap Value

Post by Angst »

There is Schwab's Fundamental Emerging Mrkts Lrg. Co. Index ETF FNDE, ER .47. It's certainly not Mid or Small cap, but it does have a value tilt. From M*:

Code: Select all

   V   B   G
L 58  27   6
M  4   3   1
S  1   0   0
[Edit] Here are some previously mentioned EM ETF's, per M*:

Code: Select all

EMGF  -  iShares Edge MSCI Multifactor EM ETF	ER .65
   V   B   G
L 24  26  22
M  7  13   8
S  0   0   0

Code: Select all

EWX  -  SPDR S&P EM SC ETF	ER .65
   V   B   G
L  1   0   3
M 26  12  11
S 28  13   5

EEMS  -  iShares EM SC ETF	ER .67
   V   B   G
L  1   1   3
M 26  14  13
S 21  11  09

Code: Select all

FEMS  -  First Trust EM SC AlphaDEX Rund ETF	ER .80
   V   B   G
L  1   0   1
M 43  12  11
S 17  11   4

DGS  -  Wisdom Tree EM SC Div Fund ETF	ER .63
   V   B   G
L  7   5   2
M 42   9   6
S 18   7   2
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

Angst wrote:There is Schwab's Fundamental Emerging Mrkts Lrg. Co. Index ETF FNDE, ER .47. It's certainly not Mid or Small cap, but it does have a value tilt. From M*:
What conclusions can we draw from this?
I draw the following conclusions:
- Morningstar style box data are probably relative to U.S. indexes. Quite meaningless unless one wants to do tactical asset allocation based on country valuations.
- With the ETFs shown, factor investing vs. market cap index investing comes for almost free in EM.
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Re: Emerging Markets Small Cap Value

Post by Engineer250 »

grabiner wrote:You can also overweight small-cap emerging markets (but not value) without a separate ETF, by using Vanguard's funds for small-cap international (which includes EM) and emerging markets (which includes small-cap). For example, if you work for the US Government and your international holdings are 30% I fund (large-cap developed), 30% Vanguard FTSE All-World Ex-US Small-Cap (which is 25% emerging), 40% Emerging Markets Index (which is 15% small), you hold EM small-cap as 13.5% of your international holdings, compared to the market weight of 3.75%.
Brilliant. This is along the lines of what I am attempting with my non-TSP accounts. Building up Vanguard Emerging Markets (VEIEX / VEMAX / VWO investor/admiral/etf) and the Vanguard FTSE All-World Ex-US Small-Cap you mention (VFSVX / VSS inv/etf). I don't mind being a tad overexposed to emerging markets. As of today thanks to the I Fund I am way overexposed to developed at 19% compared to 1% emerging of my total portfolio. I'm increasing contributions to the I Fund as well as emerging and am going to start int'l small cap as soon as a rollover is completed and hopefully bring my total international up to 30% and my emerging to a much higher portion of that 30%. The numbers you gave above are a good goal for where I should be aiming my contributions between the 3 international funds.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

Angst wrote:There is Schwab's Fundamental Emerging Mrkts Lrg. Co. Index ETF FNDE, ER .47. It's certainly not Mid or Small cap, but it does have a value tilt. From M*:

Code: Select all

   V   B   G
L 58  27   6
M  4   3   1
S  1   0   0
[Edit] Here are some previously mentioned EM ETF's, per M*:

Code: Select all

EMGF  -  iShares Edge MSCI Multifactor EM ETF	ER .65
   V   B   G
L 24  26  22
M  7  13   8
S  0   0   0

Code: Select all

EWX  -  SPDR S&P EM SC ETF	ER .65
   V   B   G
L  1   0   3
M 26  12  11
S 28  13   5

EEMS  -  iShares EM SC ETF	ER .67
   V   B   G
L  1   1   3
M 26  14  13
S 21  11  09

Code: Select all

FEMS  -  First Trust EM SC AlphaDEX Rund ETF	ER .80
   V   B   G
L  1   0   1
M 43  12  11
S 17  11   4

DGS  -  Wisdom Tree EM SC Div Fund ETF	ER .63
   V   B   G
L  7   5   2
M 42   9   6
S 18   7   2


While it may seem at first glance that FNDE is more value-y than EMGF, this may not be the case. My understanding is that EMGF is to some extent "controlled" for the momentum factor, while FNDE is not. The momemtum factor, overlaid over the value factor, usually makes the value factor seem disappear or diminish, but this is just an artifact of overlaying more factors.

From the EMGF web site:
Why EMGF?
1. Seeks to maximize exposure to factors that have historically outperformed the broad market, while maintaining a similar level of market risk
2. Focus on drivers of emerging market equity performance: inexpensive stocks, financially healthy firms, trending stocks and relatively low market cap companies

The exact algorithm / index construction for the iShares Edge Multifactor ETFs should be disclosed somewhere on the msci web site.
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Re: Emerging Markets Small Cap Value

Post by livesoft »

Average daily volume for some of those ETFs rule them completely out for me.

Nobody in their right mind would want to own EMGF. Its reported average daily volume is about 4,100 shares or a mere $150,000.

Highest volume is FNDE, followed by DGS. DGS is already difficult to get orders executed.

I was selling DGS today in several transactions and distinctly noticed that I was the only one placing real trades. It was fun submitting limit orders and watching the computers change their orders based on what I set my limit price to.

There were no trades in DGS for tens of minutes until late in the day.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

livesoft wrote:Average daily volume for some of those ETFs rule them completely out for me.

Nobody in their right mind would want to own EMGF. Its reported average daily volume is about 4,100 shares or a mere $150,000.

Highest volume is FNDE, followed by DGS. DGS is already difficult to get orders executed.

I was selling DGS today in several transactions and distinctly noticed that I was the only one placing real trades. It was fun submitting limit orders and watching the computers change their orders based on what I set my limit price to.

There were no trades in DGS for tens of minutes until late in the day.
1. What matters is the spread and order sizes of bid/ask, not the volume, if you buy at the ask and sell at the bid. (Admittedly, if you set limits within the spread, volume may be relevant.) Volume and spread are often inversely related, but not always.
2. The spread, along with other transaction cost, becomes relatively irrelevant for the buy-and-hold (boglehead) investor, if you hold the ETF for at least a few years. Amortize the spread over the number of years.
3. I can imagine that smaller fund size might translate into less internal transaction cost at the fund level for its annual turnover, especially for relatively illiquid (emerging) market mid and small caps.
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Re: Emerging Markets Small Cap Value

Post by livesoft »

comeinvest wrote:1. What matters is the spread and order sizes of bid/ask, not the volume, if you buy at the ask and sell at the bid. (If you set limits within the spread, volume may be relevant.)
2. The spread becomes relatively irrelevant for the buy-and-hold (boglehead) investor, if you hold the ETF for at least a few years. Amortize the spread over the number of years.
I disagree.

First, the fact is that EM is often the best performer or the worst performer in the Callan Periodic Table, so in my opinion one needs to sell it when it has gone up a lot and buy it when it has gone down a lot. Buy-and-hold is not for this asset class, but buy-hold-rebalance is. If one doesn't commit to active rebalancing, then there is no point in owning this asset class.

Second, when the volume is low, the spread doesn't matter because there will be no one on the other side of the transaction when you place your order. For instance, today when bid/ask was 40.09/40.14 the spread looked small, so I set a limit price to 40.13 and it was not filled. Then I experimented, I replaced that order with limit to sell 40.15 and became the lowest ask, then 40.17 and that became the lowest ask, …. In other words, I was the only person interested in selling at that time. Later in the day, there was more interest and I just sold with market orders odd-lots and sold at higher prices than today's closing price.

Third, I've been trying to rebalance out of DGS for several days now, but could not get the price I wanted, so I just had to keep trying until today I succeeded.

So what's my point? I think one will get frustrated by the lack of volume when one really wants to make a trade and become impatient and make bad decisions.

What's your experience with any of these? How have your average annual returns been in this asset class?
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Re: Emerging Markets Small Cap Value

Post by brad.clarkston »

*SIGH* ... I would kill for a EM fund that looked like and was as good a quality as IJS.

Sorry not much more to add than that.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

livesoft wrote:
comeinvest wrote: ... What's your experience with any of these? How have your average annual returns been in this asset class?
I would just "rebalance" with new money. If you think you need to trade, you might also benefit from the spread, or at least limit your transaction cost, if you trade patiently and spend a lot of time on your trades. But even if you trade patiently using limit orders, you might incur cost due to information asymmetry.
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Re: Emerging Markets Small Cap Value

Post by Taylor Larimore »

gtwhitegold wrote:
I am looking for a different EM SCV mutual fund. -- Any help is appreciated.
gwwhitegold:

Consider one broad market international fund like Vanguard Total International Stock Market Index Fund which includes EM SCV.
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Re: Emerging Markets Small Cap Value

Post by brad.clarkston »

Well I hate to say anything out of line with Taylor but ....

I bet OP in the same boat I am and it's all about the tilt. I've got the index now I want more EM SCV tilt.
I'm not willing to go with bad/mediocre funds so I've stayed out of it I'm just hoping something comes along soon.
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Re: Emerging Markets Small Cap Value

Post by livesoft »

comeinvest wrote:
livesoft wrote:
comeinvest wrote: ... What's your experience with any of these? How have your average annual returns been in this asset class?
I would just "rebalance" with new money. If you think you need to trade, you might also benefit from the spread, or at least limit your transaction cost, if you trade patiently and spend a lot of time on your trades. But even if you trade patiently using limit orders, you might incur cost due to information asymmetry.
If one is using a rebalancing bands rule like a Swedroe 5/25, then a few things happen:

1. One probably has less than 20% of their portfolio in such an asset class, so this asset class use the 25% rule.

2. With the 25%, then I don't think one can simply rebalance with new money because one will need to sell from time to time.

3. Example:

a. You buy some DGS when grap0013 tells you to on January 15, 2016. to restore your asset allocation after its 30% drop from just 7 months prior (the last time you sold it). That's outside the 25% band.

b. You sell some DGS to rebalance some time between Sep-Oct, 2016, when it has gone up 30% because it reached its trigger point.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

livesoft wrote:
comeinvest wrote:
livesoft wrote:
comeinvest wrote: ... What's your experience with any of these? How have your average annual returns been in this asset class?
I would just "rebalance" with new money. If you think you need to trade, you might also benefit from the spread, or at least limit your transaction cost, if you trade patiently and spend a lot of time on your trades. But even if you trade patiently using limit orders, you might incur cost due to information asymmetry.
If one is using a rebalancing bands rule like a Swedroe 5/25, then a few things happen:
...
I personally subscribe to the "boglehead" passive investing philosophy, but I think sometimes members in this forum get a bit ahead of themselves over-engineering allocation percentages, and/or following some advise of some "gurus" like a religion without regard to the context. In many cases cited strategies or percentages are just examples. I'm sure you will be fine adjusting your rebalancing strategy without affecting your expected returns. Rebalancing between different equity styles or regions is mainly to distribute risk, not for market timing based on past performance. As long as you have your eggs in several baskets, you will be fine.
If you need to rebalance every few years, currently the bid/ask spread e.g. on DGS is 4 cents 39.95:39.99, that of EMGF is 36.50:36.54. That is ca. 0.1%. Divide that by the number of years you hold the asset, and you may realize the cost is negligible.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

comeinvest wrote:
livesoft wrote:
comeinvest wrote:
livesoft wrote:
comeinvest wrote: ... What's your experience with any of these? How have your average annual returns been in this asset class?
I would just "rebalance" with new money. If you think you need to trade, you might also benefit from the spread, or at least limit your transaction cost, if you trade patiently and spend a lot of time on your trades. But even if you trade patiently using limit orders, you might incur cost due to information asymmetry.
If one is using a rebalancing bands rule like a Swedroe 5/25, then a few things happen:
...
I personally subscribe to the "boglehead" passive investing philosophy, but I think sometimes members in this forum get a bit ahead of themselves over-engineering allocation percentages, and/or following some advise of some "gurus" like a religion without regard to the context. In many cases cited strategies or percentages are just examples. I'm sure you will be fine adjusting your rebalancing strategy without affecting your expected returns. Rebalancing between different equity styles or regions is mainly to distribute risk, not for market timing based on past performance. As long as you have the majority of your eggs in several baskets, you will be fine.
If you need to rebalance every few years, currently the bid/ask spread e.g. on DGS is 4 cents 39.95:39.99, that of EMGF is 36.50:36.54. That is ca. 0.1%. Divide that by the number of years you hold the asset, and you may realize the cost is negligible.
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Re: Emerging Markets Small Cap Value

Post by livesoft »

The current bid/ask for round lots of EMGF is 35.79/37.23 or almost 4%. There may be some oddlot bids not exposed.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

livesoft wrote:The current bid/ask for round lots of EMGF is 35.79/37.23 or almost 4%. There may be some oddlot bids not exposed.
I have real time data for U.S. exchanges. The spread for EMGF is 4 cents with 1000 shares both bid and ask.
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Re: Emerging Markets Small Cap Value

Post by livesoft »

Thanks, I see that as well. I see some other things, too. I just tried to submit a limit order to buy just to see how the market maker would react and got this:
Error: The security entered is restricted from trading. If you need assistance, please select Customer Service above and Contact Us.
Do you own any shares of EMGF yourself? Was that you who just bought some shares? :)
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

livesoft wrote:Thanks, I see that as well. I see some other things, too. I just tried to submit a limit order to buy just to see how the market maker would react and got this:
Error: The security entered is restricted from trading. If you need assistance, please select Customer Service above and Contact Us.
Do you own any shares of EMGF yourself? Was that you who just bought some shares? :)
You need run, not walk, and switch your broker.
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Re: Emerging Markets Small Cap Value

Post by livesoft »

comeinvest wrote:You need run, not walk, and switch your broker.
OK, I switched my broker and submitted an order to buy.

It looks like there has been one trade in the past hour.
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Re: Emerging Markets Small Cap Value

Post by sperry8 »

grabiner wrote:
rustymutt wrote:You can consider EEMS, and/or EWX. I recently switched to EWX, because it's paying out better dividends, and in this low interest environment, I want better dividends.
Taxable or tax-deferred account? I do not recommend EWX for a taxable account. That high dividend yield has a lot of non-qualified dividends, and the ETF has distributed a lot of capital gains, so you don't get to keep as much of the fund return. (I learned this the hard way, and sold EWX for EEMS after it distributed too many gains.)
EWX hasn't distributed capital gains since 2011: https://us.spdrs.com/resources/distribu ... x_code2=NA
So no worries there.

And the tax cost ratio on M* shows EWX and EEMS as quite similar in regards to tax efficiency over the past 3 years although EWX is slightly worse.

Re the M* style boxes, EWX shows as more valuey and more small.

The tracking error issues also seem to have been better for EWX more recently than in the past.

So if you're looking for SCV tilt - EWX appears to be the winner over EEMS.
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Re: Emerging Markets Small Cap Value

Post by comeinvest »

sperry8 wrote:
grabiner wrote:
rustymutt wrote:You can consider EEMS, and/or EWX. I recently switched to EWX, because it's paying out better dividends, and in this low interest environment, I want better dividends.
Taxable or tax-deferred account? I do not recommend EWX for a taxable account. That high dividend yield has a lot of non-qualified dividends, and the ETF has distributed a lot of capital gains, so you don't get to keep as much of the fund return. (I learned this the hard way, and sold EWX for EEMS after it distributed too many gains.)
EWX hasn't distributed capital gains since 2011: https://us.spdrs.com/resources/distribu ... x_code2=NA
So no worries there.

And the tax cost ratio on M* shows EWX and EEMS as quite similar in regards to tax efficiency over the past 3 years although EWX is slightly worse.

Re the M* style boxes, EWX shows as more valuey and more small.

The tracking error issues also seem to have been better for EWX more recently than in the past.

So if you're looking for SCV tilt - EWX appears to be the winner over EEMS.
No offense, but I think your analysis is flawed.
- Capital gains in a prolonged down market are typically zero, this is no surprise. With the turnover ratios of these funds, they will be high in the long run, and similarly high for both funds, if and when markets go up, which they are almost certain to do. They will be similarly high because both funds track nearly identical indexes, and have to follow the same government regulations. One of many examples where looking at past or current numbers have close to zero predictive value.
- M* box differences are solely an artifact of slight differences in geographic index definition, as explained further up in this thread.
- Tracking error has many components, and does not even capture the full implementation shortfall cost. I think the predictive value is very limited. To arrive at an estimate for future downside tracking error, one would have to look at the expense ratio (easy), and analyze the trading desk capabilities and algorithms of both funds, which are not disclosed.
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Re: Emerging Markets Small Cap Value

Post by brad.clarkston »

I agree out of the listed funds EWX is the best but that's not saying much.

At 50% Mid-Cap funds, a ER of .65% a tracking error of .78 AND a Volume of 27,919 ... and to top it off it's a commission sale at Fidelity.

I'm still looking.
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Re: Emerging Markets Small Cap Value

Post by sperry8 »

comeinvest wrote:
sperry8 wrote:
grabiner wrote:
rustymutt wrote:You can consider EEMS, and/or EWX. I recently switched to EWX, because it's paying out better dividends, and in this low interest environment, I want better dividends.
Taxable or tax-deferred account? I do not recommend EWX for a taxable account. That high dividend yield has a lot of non-qualified dividends, and the ETF has distributed a lot of capital gains, so you don't get to keep as much of the fund return. (I learned this the hard way, and sold EWX for EEMS after it distributed too many gains.)
EWX hasn't distributed capital gains since 2011: https://us.spdrs.com/resources/distribu ... x_code2=NA
So no worries there.

And the tax cost ratio on M* shows EWX and EEMS as quite similar in regards to tax efficiency over the past 3 years although EWX is slightly worse.

Re the M* style boxes, EWX shows as more valuey and more small.

The tracking error issues also seem to have been better for EWX more recently than in the past.

So if you're looking for SCV tilt - EWX appears to be the winner over EEMS.
No offense, but I think your analysis is flawed.
- Capital gains in a prolonged down market are typically zero, this is no surprise. With the turnover ratios of these funds, they will be high in the long run, and similarly high for both funds, if and when markets go up, which they are almost certain to do. They will be similarly high because both funds track nearly identical indexes, and have to follow the same government regulations. One of many examples where looking at past or current numbers have close to zero predictive value.
- M* box differences are solely an artifact of slight differences in geographic index definition, as explained further up in this thread.
- Tracking error has many components, and does not even capture the full implementation shortfall cost. I think the predictive value is very limited. To arrive at an estimate for future downside tracking error, one would have to look at the expense ratio (easy), and analyze the trading desk capabilities and algorithms of both funds, which are not disclosed.
1. EWX is up in the past 5 years... and stll no cap gain distributions.
2- I re-read the whole thread and don't see anything about M* style boxes being an artifact. Are you suggesting the M* style boxes are wrong for all international and EM?
3- I don't know much about tracking error or its components. I only know that EWX has done a better job recently. Whether this will continue or get worse I cannot say. However, if you are going to use that argument then you'd also be hard pressed to choose EEMS. After all, you'd have the same issues there. So you'd have to just live with whatever happens.

Note, my analysis is simply to try to identify the better of EEMS or EWX.

Kenster1 wrote:I wish there were a good EMV option with emphasis in the Midcap space - that would be a sweeter spot for me - or perhaps an all-cap EMV fund with heavier emphasis on Midcaps rather than the big megacaps typical of a market-weighted fund (....oh I just described the DFA All-cap funds :)).

The EMV in Smallcap space is just too risky and volatile --- let me repeat, we're talking about small companies in emerging markets and then adding a value-tilt which includes the more distressed companies. Personally I prefer more emphasis in going a big bigger with Midcaps - but none really focuses on that.

Otherwise - the best bet for me is to just focus on EMV all-cap.

The Value and Size Effects in Emerging Markets
http://www.advisoryresearch.com/wp-cont ... e-2014.pdf
What about TLTE (FlexShares Morningstar Emerging Markets Factor Tilt Index)? Seems to be constructed similarly to the DFA EM value fund. And as the research you linked to shows... it mostly tilts value (rather than small) which may be a good thing if that research is to be believed.

btw are there any corroborating studies for the research you posted that shows only the value premium in EM remains and the small premium doesn't exist there? A google search for everyone else seems to show people believe both small and value premiums in EM work. I like TLTE if only the value premium exists - but prefer EWX (or possibly EEMS) if both do.
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Re: Emerging Markets Small Cap Value

Post by grabiner »

sperry8 wrote:1. EWX is up in the past 5 years... and stll no cap gain distributions.]
The share price of EWX now is about the same as it was five years ago, so there haven't been many capital gains for potential distribution. Almost all of the fund's 5-year gain is from dividends.

And I would expect EWX to continue distributing capital gains if the market rises EWX and the developed analogue GWX are the only two international small-cap ETFs which have distributed capital gains after their second year. EWX distributed gains in its third and fourth years (2010 and 2011), and GWX has distributed gains in the last three years.

I don't know what will happen with EEMS. It hasn't distributed a capital gain, but it hasn't had much opportunity to distribute one; its share price was never much higher than at inception.
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Re: Emerging Markets Small Cap Value

Post by whodidntante »

sperry8 wrote:
What about TLTE (FlexShares Morningstar Emerging Markets Factor Tilt Index)? Seems to be constructed similarly to the DFA EM value fund. And as the research you linked to shows... it mostly tilts value (rather than small) which may be a good thing if that research is to be believed.
I like TLTE and I own some, but it can be difficult to buy at a price close to NAV. The DFA EM value fund is my favorite and I have a large position (to me) in that.
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