International Small-cap Value Funds ??

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e_swami
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International Small-cap Value Funds ??

Post by e_swami » Sun Jan 14, 2018 3:06 pm

I like Merriman's Ultimate-buy-and-hold approach. However, Vanguard does not seem to have any funds for the "International small cap value" asset class. Are there any alternatives that work, other than going to DFA?

david1082b
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Re: International Small-cap Value Funds ??

Post by david1082b » Sun Jan 14, 2018 3:23 pm

I searched International Small-cap Value, and found a page with the promising title "Top 6 International Small Cap Value ETFs"; however, when I clicked on it it only had on entry: "WisdomTree International Hedged SmallCap Dividend Fund". Not necessarily what I expected. Furthermore, when I clicked on the title of the fund I got this page that said:
This ETF is no longer active.
Something of a tragedy it seems.


http://etfdb.com/themes/international-s ... alue-etfs/
http://etfdb.com/etf/HDLS/

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whodidntante
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Re: International Small-cap Value Funds ??

Post by whodidntante » Sun Jan 14, 2018 3:25 pm

There isn't much to chose from. Some here like DGS WisdomTree Emerging Markets SmallCap Dividend Fund for EM SCV. Look at DLS WisdomTree International SmallCap Dividend Fund to see if you like the factor loadings. There are multifactor funds widely available now and I tend to favor those, but that is NOT what Paul Merriman is telling you to buy.

RNJ
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Re: International Small-cap Value Funds ??

Post by RNJ » Sun Jan 14, 2018 3:29 pm

Schwab Fundamental Small Co ETF (FNDC)

http://www.morningstar.com/etfs/ARCX/FNDC/quote.html

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whodidntante
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Re: International Small-cap Value Funds ??

Post by whodidntante » Sun Jan 14, 2018 3:31 pm

RNJ wrote:
Sun Jan 14, 2018 3:29 pm
Schwab Fundamental Small Co ETF (FNDC)

http://www.morningstar.com/etfs/ARCX/FNDC/quote.html
I somehow forgot about that one even though I own it, LOL.

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cfs
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Re: International Small-cap Value Funds ??

Post by cfs » Sun Jan 14, 2018 3:40 pm

Well, based on Morningstar the Schwab Fundamental Small Co ETF is not an international small value product (small/mid blend?). Thanks for reading ~cfs~
~ Member of the Active Retired Force since 2014 ~

Buttery Lobster
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Re: International Small-cap Value Funds ??

Post by Buttery Lobster » Sun Jan 14, 2018 4:19 pm

I opted against FNDC for my international small-cap developed slice. Its average market cap is bigger than SCHC and DLS, it doesn't seem particularly more valuey than SCHC, and is really heavily concentrated in Japan (over 37%).

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whodidntante
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Re: International Small-cap Value Funds ??

Post by whodidntante » Sun Jan 14, 2018 4:37 pm

Buttery Lobster wrote:
Sun Jan 14, 2018 4:19 pm
I opted against FNDC for my international small-cap developed slice. Its average market cap is bigger than SCHC and DLS, it doesn't seem particularly more valuey than SCHC, and is really heavily concentrated in Japan (over 37%).
Fundamental indexes lead to overweighting countries and specific sectors. If you override the weighting to give it a similar country and sector weighting to a float weighted index, you reintroduce price.

e_swami
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Re: International Small-cap Value Funds ??

Post by e_swami » Sun Jan 14, 2018 5:05 pm

SCHC and FNDC are not very different from VFSVX. These are all intl small cap but not necessarily "value"

https://personal.vanguard.com/us/funds/ ... true#tab=2

Buttery Lobster
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Re: International Small-cap Value Funds ??

Post by Buttery Lobster » Sun Jan 14, 2018 5:10 pm

whodidntante wrote:
Sun Jan 14, 2018 4:37 pm
Fundamental indexes lead to overweighting countries and specific sectors. If you override the weighting to give it a similar country and sector weighting to a float weighted index, you reintroduce price.
I don't necessarily target a weighting closer to float-weighted, I just prefer the way WisdomTree caps any single country or sector to 25% of the fund to maintain a bit more diversification. Some of these fundamental funds can exceed 40% weighting in a single country or sector, which starts to look more like a bet on that country.

Buttery Lobster
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Re: International Small-cap Value Funds ??

Post by Buttery Lobster » Sun Jan 14, 2018 5:17 pm

e_swami wrote:
Sun Jan 14, 2018 5:05 pm
SCHC and FNDC are not very different from VFSVX. These are all intl small cap but not necessarily "value"
The big difference is that VFSVX holds about 20% in emerging markets. So if you want a broad international small-cap fund, that's would work great (same as VSS) for a very low ER. Otherwise if you wanted to break out your developed international holdings from EM, SCHC is essentially the same as the developed 80% of VFSVX/VSS, while DGS/EWX/EEMS would be good stand-alone small cap emerging markets choices.

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jhfenton
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Re: International Small-cap Value Funds ??

Post by jhfenton » Sun Jan 14, 2018 5:45 pm

At this point, I only own VSS/VFSVX for international small cap. (It is our largest equity position.) None of the international small-cap value funds that I have access to are compelling yet.

I have my eye on ISCF (iShares EDGE MSCI Multifactor International Small Cap ETF), but at the moment it only has $29.9MM in assets. It is a bit over two years old, but it essentially attracted no assets at all until iShares cut the fee to 40 bp a year ago from 60 bp. It has still been a slow process, picking up one $3 MM creation unit every few months.

But I like the way the iShares international multi-factor funds are put together. I bought EMGF, ISCF's emerging markets sister fund with a free trade in my Lively-TD Ameritrade HSA a few months ago. EMGF, at 45 bp, has picked up a bit of steam, passed $100 MM, and is now at $117.5 MM. It's not particularly liquid, but it crossed my threshold for a buy-and-hold position in a tax-advantaged account.

Random Walker
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Re: International Small-cap Value Funds ??

Post by Random Walker » Sun Jan 14, 2018 6:02 pm

I don't know any alternatives other than DFA. But I do think it's a valuable asset class. Think I've read it's an even better diversified than EM.

Dave

e_swami
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Re: International Small-cap Value Funds ??

Post by e_swami » Sun Jan 14, 2018 6:48 pm

jhfenton wrote:
Sun Jan 14, 2018 5:45 pm
At this point, I only own VSS/VFSVX for international small cap. (It is our largest equity position.) None of the international small-cap value funds that I have access to are compelling yet.

I have my eye on ISCF (iShares EDGE MSCI Multifactor International Small Cap ETF), but at the moment it only has $29.9MM in assets. It is a bit over two years old, but it essentially attracted no assets at all until iShares cut the fee to 40 bp a year ago from 60 bp. It has still been a slow process, picking up one $3 MM creation unit every few months.

But I like the way the iShares international multi-factor funds are put together. I bought EMGF, ISCF's emerging markets sister fund with a free trade in my Lively-TD Ameritrade HSA a few months ago. EMGF, at 45 bp, has picked up a bit of steam, passed $100 MM, and is now at $117.5 MM. It's not particularly liquid, but it crossed my threshold for a buy-and-hold position in a tax-advantaged account.
I already own VINEX for international small cap. Question is whether VFSVX can be considered "small cap value" to VINEX's "small cap". The former does have lower PE and P/B ratios than VINEX but not sure if thats adequate to make it "value"

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whodidntante
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Re: International Small-cap Value Funds ??

Post by whodidntante » Sun Jan 14, 2018 6:57 pm

Buttery Lobster wrote:
Sun Jan 14, 2018 5:10 pm
whodidntante wrote:
Sun Jan 14, 2018 4:37 pm
Fundamental indexes lead to overweighting countries and specific sectors. If you override the weighting to give it a similar country and sector weighting to a float weighted index, you reintroduce price.
I don't necessarily target a weighting closer to float-weighted, I just prefer the way WisdomTree caps any single country or sector to 25% of the fund to maintain a bit more diversification. Some of these fundamental funds can exceed 40% weighting in a single country or sector, which starts to look more like a bet on that country.
Gotcha. DFA also puts a cap on country weighting. At least their emerging markets value fund does; I'm not sure about their international SCV fund.

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jhfenton
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Re: International Small-cap Value Funds ??

Post by jhfenton » Sun Jan 14, 2018 7:22 pm

e_swami wrote:
Sun Jan 14, 2018 6:48 pm
jhfenton wrote:
Sun Jan 14, 2018 5:45 pm
At this point, I only own VSS/VFSVX for international small cap. (It is our largest equity position.) None of the international small-cap value funds that I have access to are compelling yet.

I have my eye on ISCF (iShares EDGE MSCI Multifactor International Small Cap ETF), but at the moment it only has $29.9MM in assets. It is a bit over two years old, but it essentially attracted no assets at all until iShares cut the fee to 40 bp a year ago from 60 bp. It has still been a slow process, picking up one $3 MM creation unit every few months.

But I like the way the iShares international multi-factor funds are put together. I bought EMGF, ISCF's emerging markets sister fund with a free trade in my Lively-TD Ameritrade HSA a few months ago. EMGF, at 45 bp, has picked up a bit of steam, passed $100 MM, and is now at $117.5 MM. It's not particularly liquid, but it crossed my threshold for a buy-and-hold position in a tax-advantaged account.
I already own VINEX for international small cap. Question is whether VFSVX can be considered "small cap value" to VINEX's "small cap". The former does have lower PE and P/B ratios than VINEX but not sure if thats adequate to make it "value"
I don’t consider VSS to be ex-US small value. It is about as broad an international small cap fund as you could create. VINEX, on the other hand, has more of a growth tilt, especially with the newest sub-advisor.

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rustymutt
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Re: International Small-cap Value Funds ??

Post by rustymutt » Sun Jan 14, 2018 7:23 pm

e_swami wrote:
Sun Jan 14, 2018 3:06 pm
I like Merriman's Ultimate-buy-and-hold approach. However, Vanguard does not seem to have any funds for the "International small cap value" asset class. Are there any alternatives that work, other than going to DFA?

At one time Paul himself suggested DLS, but rather he still does or not I don't know. Paul you on here?
I'm amazed at the wealth of Knowledge others gather, and share over a lifetime of learning. The mind is truly unique. It's nice when we use it!

Theoretical
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Re: International Small-cap Value Funds ??

Post by Theoretical » Sun Jan 14, 2018 7:29 pm

FNDC and the Powershares PDN (.50) are good options. Don't be unduly taken aback by them being "blend funds" as the RAFI methodology tends to grab a lot of deep value and cheap blend-growth. They're also the only good pair of solutions in taxable accounts.

DLS is great in tax-deferred accounts but not taxable. It historically tracks the DFA fund extremely well.

Segall Bryant and Hamill has a pretty interesting Quality/Value/Momentum Quant fund SBHSX, available at Ameritrade and Schwab commission free and load waived. The downside is an ER of 1.28% and a turnover rate of 90-100% for about 400 holdings.

If you're willing to take the risks of stock-picking (fundamental analysis) in an area that's extremely limited in funds, there's a Microcap Value Global fund called Metis Global Micro Cap Value Fund Class I. It's got a steep ER of 1.7, but there's no question that the stocks its harvesting are truly, truly microcap companies, rather than the midcaps that dominated most international small cap funds. It's got an average market cap of 0.26 Billion which is 1/10 that of FNDC/PDN. It's about 20/33/47 US/Japan/Global ex-US and Japan (with fair slugs of EM micros). Even though it's stock picking, there's no question it's on the extreme value side. It has about 300 companies and a 77% turnover rate.

From Morningstar for the A shares:

Code: Select all

Data Stock  Portfolio Benchmark Category Avg

Code: Select all

Price/Prosp. Earnings	9.39	17.93	19.34
Price/Book* 		0.83	1.93	2.35
Price/Sales* 		0.49	1.23	1.46
Price/Cash Flow*	3.58	7.62	9.15
Dividend Yield %*	2.70	2.08	1.80
Long-Term Earnings   	14.31	12.79	11.35
Historical Earnings %	-12.13	-21.48	9.20
Sales Growth %		-6.03	-34.41	1.31
Cash-Flow Growth %	-14.91	-0.81	-2.67
Book-Value Growth %	-9.70	-27.31	6.13

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wander
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Re: International Small-cap Value Funds ??

Post by wander » Sun Jan 14, 2018 8:31 pm

DDLS
DIM
DLS
PDN
IDHQ

vesalius
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Re: International Small-cap Value Funds ??

Post by vesalius » Sun Jan 14, 2018 9:16 pm


fennewaldaj
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Re: International Small-cap Value Funds ??

Post by fennewaldaj » Sun Jan 14, 2018 11:34 pm

I spent some time looking at all the NTF mutual funds at Fidelity since I have access to a brokerage link that is mutual fund only. There really aren't that many funds in the international small/mid value category. A lot of them have a pretty mild value tilt so I would not consider them (It seems pointless to pay a large fee to add a very slight tilt). With a significant enough tilt I might consider them. In addition to high fees, A general problem with all these funds is they are pretty concentrated (none have more than 100 stocks). Also some have so few assets they could easily be closed.

Probably the best one I found was

Pear Tree Polaris Foreign Value Small Cap Fund ER 1.45 (924.5 M in assets) This one has a pretty solid tilt 50/50 small/mid

http://portfolios.morningstar.com/fund/ ... ture=en-US

Others
AllianzGI NFJ International Small-Cap Value Fund ER 1.3 (4.2 M in assets) milt tilt ~60/40 mid/small

http://portfolios.morningstar.com/fund/ ... ture=en-US

Heartland International Value Fund (HINVX) ER 1.25. (30 M assets) This fund is very tilted but has done pretty terribly. My understandings is bad results are more persistent than good ones.

http://beta.morningstar.com/funds/XNAS/HINVX/quote.html

Intrepid International Investor (ICMIX) ER 1.4 (~30 M assets) This one is super tilted and super small but all its holdings are in 21! stocks.

http://portfolios.morningstar.com/fund/ ... ture=en-US

whyme
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Re: International Small-cap Value Funds ??

Post by whyme » Mon Jan 15, 2018 1:20 am

Paul Merriman has a list of what he considers "Best-in-Class" ETFs. https://paulmerriman.com/best-in-class- ... ortfolios/

He suggests Wisdomtree (DLS) for the Int'l Small Cap Value, and SPDR® S&P Emerging Markets Small Cap (EWX), to cover another of his favored asset classes that Vanguard doesn't offer.

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privatefarmer
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Re: International Small-cap Value Funds ??

Post by privatefarmer » Mon Jan 15, 2018 1:45 am

FPL capital management will sell DFA access for about $1k-$1500, depending on how many accounts you need opened, as a one-time fee. DISVX is a great international SCV fund and DEMSX is an EM SCV fund. Combine that with DFSVX and you're set. I use just DFSVX for domestic and DEMSX for international as they have lower correlation. DISVX is kind of a hybrid between DFSVX and DEMSX so I don't bother using it.

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in_reality
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Re: International Small-cap Value Funds ??

Post by in_reality » Mon Jan 15, 2018 2:47 am

Note: SFILX is the mutual fund version of FNDC. FNDC will be more tax efficient as SFILX will issue yearly capital gains

Looking at the funds mentioned so far, I see no reason to switch from FNDC for me.

Feb 2008 - Dec 2017 CAGR (life of SFILX)
VINEX 13.78% <--Vanguard International Explorer Inv
SFILX 13.49% <--Schwab Fdmtl Intl Sm Co Idx
DLS 13.39% <--WisdomTree International SmallCp Div ETF
PDN 13.04% <--PowerShares FTSE RAFI DvMkt exUS S/M ETF
DISVX 13.01% <--DFA International Small Cap Value I
DIM 10.63% <--WisdomTree International MidCap Div ETF
IDHQ 10.60% <--PowerShares S&P Intl Dev Quality ETF

Jun 2008 - Dec 2017 (life of QUSOX)
QUSOX 7.94% <--Pear Tree Polaris Fgn Val Sm Cap Ord
SFILX 6.93%

Nov 2010 - Dec 2017 (life of HINVX)

SFILX 8.59%
HINVX 2.93% <--Heartland International Value

Jan 2015 - Dec 2017 (life of ICMIX)

SFILX 13.96%
ICMIX 6.65% <--Intrepid International Investor

Jun 2015 - Dec 2017 (life of ISCF)
SFILX 18.67%
ISCF 16.79% <--iShares Edge MSCI Mltfct Intl SmCp ETF

May 2009 - Dec 2017 (life of VFSVX)
SFILX 9.79%
VFSVX 7.74% <--Vanguard FTSE All-Wld ex-US SmCp Idx Inv

Jul 2014 - Dec 2017 (life of SBHSX)
SFILX 13.96%
SBHSX 13.01% <--Segall Bryant&Hamill Intl Sm Cp A

May 2016 - Dec 2017 (life of DDLS)

SFILX 29.08%
DDLS 26.90% <--WisdomTree Dyn Ccy Hdgd Intl SmCp Eq ETF

Jul 2012 - Dec 2017 (life of AJVAX)
SFILX 12.03%
AJVAX 9.45% <--AllianzGI NFJ Intl Small-Cap Value A

[date per portfoliovisualizer]
Last edited by in_reality on Mon Jan 15, 2018 5:22 am, edited 5 times in total.

Longtermgrowth
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Re: International Small-cap Value Funds ??

Post by Longtermgrowth » Mon Jan 15, 2018 4:10 am

rustymutt wrote:
Sun Jan 14, 2018 7:23 pm
e_swami wrote:
Sun Jan 14, 2018 3:06 pm
I like Merriman's Ultimate-buy-and-hold approach. However, Vanguard does not seem to have any funds for the "International small cap value" asset class. Are there any alternatives that work, other than going to DFA?

At one time Paul himself suggested DLS, but rather he still does or not I don't know. Paul you on here?
His "Best-In-Class ETFs" list, updated November 2017, lists DLS (WisdomTree Intl. SmallCap Div Fd.) for International Small Cap Value: https://paulmerriman.com/best-in-class- ... portfolio/

Edit: Just now noticed "whyme" beat me to it :oops: Anyway, I hold DLS and like it quite a bit.

fennewaldaj
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Re: International Small-cap Value Funds ??

Post by fennewaldaj » Mon Jan 15, 2018 4:40 am

I accidentally posted the I class ticker for that peartree polaris fund. The ticker for the investor shares class is QUSOX (comes with 2500 min and 1.45 ER). I think I would consider this fund for the for a fee closer 1% (I don't have a place to buy the wisdom tree fund or any of the other passive options) but I am thinking 1.45 is starting to get too high for the benefit access to the asset class would provide.

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rustymutt
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Re: International Small-cap Value Funds ??

Post by rustymutt » Mon Jan 15, 2018 10:00 am

Longtermgrowth wrote:
Mon Jan 15, 2018 4:10 am
rustymutt wrote:
Sun Jan 14, 2018 7:23 pm
e_swami wrote:
Sun Jan 14, 2018 3:06 pm
I like Merriman's Ultimate-buy-and-hold approach. However, Vanguard does not seem to have any funds for the "International small cap value" asset class. Are there any alternatives that work, other than going to DFA?

At one time Paul himself suggested DLS, but rather he still does or not I don't know. Paul you on here?
His "Best-In-Class ETFs" list, updated November 2017, lists DLS (WisdomTree Intl. SmallCap Div Fd.) for International Small Cap Value: https://paulmerriman.com/best-in-class- ... portfolio/

Edit: Just now noticed "whyme" beat me to it :oops: Anyway, I hold DLS and like it quite a bit.
It's been a good part of an overall great portfolio for me.
I'm amazed at the wealth of Knowledge others gather, and share over a lifetime of learning. The mind is truly unique. It's nice when we use it!

e_swami
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Re: International Small-cap Value Funds ??

Post by e_swami » Mon Jan 15, 2018 6:37 pm

Theoretical wrote:
Sun Jan 14, 2018 7:29 pm
FNDC and the Powershares PDN (.50) are good options. Don't be unduly taken aback by them being "blend funds" as the RAFI methodology tends to grab a lot of deep value and cheap blend-growth. They're also the only good pair of solutions in taxable accounts.

DLS is great in tax-deferred accounts but not taxable. It historically tracks the DFA fund extremely well.
Hi Theoretical, can u explain why FNDC is good for taxable accounts while DLS is not? Does it pay less by way of dividends for some reason? Or is there some other reason?

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Re: International Small-cap Value Funds ??

Post by Theoretical » Mon Jan 15, 2018 7:20 pm

e_swami wrote:
Mon Jan 15, 2018 6:37 pm
Theoretical wrote:
Sun Jan 14, 2018 7:29 pm
FNDC and the Powershares PDN (.50) are good options. Don't be unduly taken aback by them being "blend funds" as the RAFI methodology tends to grab a lot of deep value and cheap blend-growth. They're also the only good pair of solutions in taxable accounts.

DLS is great in tax-deferred accounts but not taxable. It historically tracks the DFA fund extremely well.
Hi Theoretical, can u explain why FNDC is good for taxable accounts while DLS is not? Does it pay less by way of dividends for some reason? Or is there some other reason?
Sure, the dividend focus plays part of the difference, but the big reason is that WisdomTree does not appear to use the tax efficiency techniques Vanguard and Blackrock are Grand Masters at and that Schwab's pretty good at doing. If you look at the tax efficiency for the "Dividend" funds, they're basically no better than active mutual funds.

Longtermgrowth
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Re: International Small-cap Value Funds ??

Post by Longtermgrowth » Tue Jan 16, 2018 4:03 am

Theoretical wrote:
Mon Jan 15, 2018 7:20 pm
e_swami wrote:
Mon Jan 15, 2018 6:37 pm
Theoretical wrote:
Sun Jan 14, 2018 7:29 pm
FNDC and the Powershares PDN (.50) are good options. Don't be unduly taken aback by them being "blend funds" as the RAFI methodology tends to grab a lot of deep value and cheap blend-growth. They're also the only good pair of solutions in taxable accounts.

DLS is great in tax-deferred accounts but not taxable. It historically tracks the DFA fund extremely well.
Hi Theoretical, can u explain why FNDC is good for taxable accounts while DLS is not? Does it pay less by way of dividends for some reason? Or is there some other reason?
Sure, the dividend focus plays part of the difference, but the big reason is that WisdomTree does not appear to use the tax efficiency techniques Vanguard and Blackrock are Grand Masters at and that Schwab's pretty good at doing. If you look at the tax efficiency for the "Dividend" funds, they're basically no better than active mutual funds.
I do have to say that DLS had a hair below 89% Qualified Dividend Income in 2016, with a Foreign Tax Credit higher than the same amount invested in Vanguard Total International Stock Index. Between the QDI and FTC, it really didn't look too terrible to me in taxable. I'm looking forward to the 2017 numbers which should be available soon. If WisdomTree follows the trend of Vanguard, QDI will be lower.
Now I also have some DGS (WisdomTree Emerging Markets SmallCap Dividend Fund) in taxable for Emerging Markets Small Value, and that fund had a hair below 40% QDI in 2016, but a large FTC. I hope that triceratop includes DLS and DGS in the upcoming 2017 relative tax efficiency calculations...

1nv35t
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Re: International Small-cap Value Funds ??

Post by 1nv35t » Tue Jan 16, 2018 5:13 am

As a UK investor I track the UK's FT250 (midcap) index as a proxy for "SCV" and for data since 1986 the two have compared in risk/reward when rebased into either currency. Market cap sizes tend to compare to SCV (UK midcaps are comparable in size to US small caps). The UK doesn't impose any dividend withholding taxes however I'm not aware of any States side ETF for access. There are individual stocks listed in London that are Investment Trusts i.e. businesses whose business is purely financials (owning stocks) and some of those benchmark the FT250 index, however they can have large fees (north of 1% incorporated into that).

Rebased into US$ and FT250 (red) versus SCV (blue) ...

Image

had a big kicker in the mid 1980's (FX benefit for US investors from holding GBP) that drove them apart. Since then (discount that) and subsequently the two have tracked each other reasonably closely.

For tax efficiency reasons I prefer to allocate half to a 2x FT250 (boost etp (Wisdom Tree) 2MCL) and half to bonds, rebalanced yearly as my FT250 exposure as that is a total return swap (pays no dividends) and has a 0.6% ER (so 50% loading = 0.3% effective cost to track the FT250).

ralph124cf
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Re: International Small-cap Value Funds ??

Post by ralph124cf » Tue Jan 16, 2018 7:17 pm

I have access to DFA funds in my company's 401(k) at Schwab with no advisor. There is a $15 fee per trade, but no load or other sales charge or 12b-1 fees. Interestingly, I also have an IRA at Schwab, but I am unable to invest in DFA funds in the IRA.

I use and like both DFEVX and DISVX, but fasten your seat belt and prepare for the roller coaster ride.

Ralph

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sunnywindy
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Re: International Small-cap Value Funds ??

Post by sunnywindy » Tue Jan 16, 2018 7:54 pm

Not exactly what you are looking for, but you may want to check out Hartford Funds Multifactor Global Small Cap ETF (ROGS). https://www.hartfordfunds.com/etfs/rogs.html. It is US/Intl/EM small caps with a 50% value, 30% momentum, 20% quality tilt for 0.56% ER. I wish someone offered a simple ACWI small-cap value ETF - I would buy it!
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lazyday
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Re: International Small-cap Value Funds ??

Post by lazyday » Wed Jan 17, 2018 6:03 am

jhfenton wrote:
Sun Jan 14, 2018 5:45 pm
I have my eye on ISCF (iShares EDGE MSCI Multifactor International Small Cap ETF), but at the moment it only has $29.9MM in assets. It is a bit over two years old, but it essentially attracted no assets at all until iShares cut the fee to 40 bp a year ago from 60 bp. .... I bought EMGF, ISCF's emerging markets sister fund
Does it concern you that EMGF NAV has fallen behind its index by more than the ER? Over the last year, it's behind by about 1% (including the ER) and over the last two years, about .6% per year. Current ER is .45%, I didn't check history.

The Schwab RAFI EM fund is no better, behind by about .7% for both the last year and last three years. Current ER .39%. I still own it, but wonder if with added risks, it's worth the extra cost over VWO.

In contrast, ISCF seems to be doing a great job keeping up with its index. Over the last 2.67 years, it only fell behind by .4% per year. From what you say, this is less than the average ER. Though I suppose a tiny fund incurs smaller trading costs, specifically market impact costs. Schwab's funds aren't so small. Yet largecap FNDF and midcap FNDC also seem to be tracking pretty well. Maybe EM is the one to watch out for.

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jhfenton
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Re: International Small-cap Value Funds ??

Post by jhfenton » Wed Jan 17, 2018 8:38 am

lazyday wrote:
Wed Jan 17, 2018 6:03 am
jhfenton wrote:
Sun Jan 14, 2018 5:45 pm
I have my eye on ISCF (iShares EDGE MSCI Multifactor International Small Cap ETF), but at the moment it only has $29.9MM in assets. It is a bit over two years old, but it essentially attracted no assets at all until iShares cut the fee to 40 bp a year ago from 60 bp. .... I bought EMGF, ISCF's emerging markets sister fund
Does it concern you that EMGF NAV has fallen behind its index by more than the ER? Over the last year, it's behind by about 1% (including the ER) and over the last two years, about .6% per year. Current ER is .45%, I didn't check history.

The Schwab RAFI EM fund is no better, behind by about .7% for both the last year and last three years. Current ER .39%. I still own it, but wonder if with added risks, it's worth the extra cost over VWO.

In contrast, ISCF seems to be doing a great job keeping up with its index. Over the last 2.67 years, it only fell behind by .4% per year. From what you say, this is less than the average ER. Though I suppose a tiny fund incurs smaller trading costs, specifically market impact costs. Schwab's funds aren't so small. Yet largecap FNDF and midcap FNDC also seem to be tracking pretty well. Maybe EM is the one to watch out for.
It's pretty early for EMGF. The fund is only two years' old and for its first year, the ER was 0.65%. The fee was cut to 0.45% a year ago, at which point it finally started to slowly attract assets (now $134MM). Since inception, the fund has trailed its index by 0.64% compared to an average ER of roughly 0.55%. That's not enough to alarm me on a new fund with an essentially active mandate. They're going to have higher trading costs compared to a passive fund like VWO. (The one-year numbers can jump around a bit due to end-date inconsistencies. ETF.com shows a one-year tracking error of 0.59% compared to the roughly 1% number shown on the iShares website. The 0.64% since inception comes from iShares, which seems more in-line with the 0.59% for the one-year.)

ISCF probably benefits from higher securities lending revenue for its small-cap universe. VSS has actually outperformed its index by 30 bp per year over the last 3 years. (VSS did not do as well tracking in its first few years.)

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Re: International Small-cap Value Funds ??

Post by Swelfie » Wed Jan 17, 2018 11:24 am

There is also TLTD/TLTE which is flexshares' small cap value for developed and emerging markets respectively. About 1 billion in assets for developed, 600 MM for emerging. Expense ratio is pretty reasonable for what it is.

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Re: International Small-cap Value Funds ??

Post by CULater » Wed Jan 17, 2018 11:49 am

Swelfie wrote:
Wed Jan 17, 2018 11:24 am
There is also TLTD/TLTE which is flexshares' small cap value for developed and emerging markets respectively. About 1 billion in assets for developed, 600 MM for emerging. Expense ratio is pretty reasonable for what it is.
Just checked out TLTD and very weird, it holds a 20% "cash component". What the heck is that and why?

Cash component for TLTE also very high - 12%.
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Re: International Small-cap Value Funds ??

Post by lazyday » Wed Jan 17, 2018 4:19 pm

jhfenton wrote:
Wed Jan 17, 2018 8:38 am
VSS has actually outperformed its index by 30 bp per year over the last 3 years. (VSS did not do as well tracking in its first few years.)
Impressive.

VWO is only behind by .1%, less than the ER. 10 year return is more impressive, .09% in spite of higher ER in the past.

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Re: International Small-cap Value Funds ??

Post by vesalius » Wed Jan 17, 2018 4:31 pm

lazyday wrote:
Wed Jan 17, 2018 4:19 pm
jhfenton wrote:
Wed Jan 17, 2018 8:38 am
VSS has actually outperformed its index by 30 bp per year over the last 3 years. (VSS did not do as well tracking in its first few years.)
Impressive.

VWO is only behind by .1%, less than the ER. 10 year return is more impressive, .09% in spite of higher ER in the past.
Both Vanguard and Blackrock/iShares are really on top of securities lending. Some of the BlackRock etfs overall are free to own or pay the shareholder to own them as a result.

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Re: International Small-cap Value Funds ??

Post by Nicolas » Wed Jan 17, 2018 5:30 pm

How about FEMS? (First Trust Emerging Markets Small Cap AlphaDEX Fund) ER 0.80%

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Re: International Small-cap Value Funds ??

Post by Theoretical » Wed Jan 17, 2018 5:59 pm

vesalius wrote:
Wed Jan 17, 2018 4:31 pm
lazyday wrote:
Wed Jan 17, 2018 4:19 pm
jhfenton wrote:
Wed Jan 17, 2018 8:38 am
VSS has actually outperformed its index by 30 bp per year over the last 3 years. (VSS did not do as well tracking in its first few years.)
Impressive.

VWO is only behind by .1%, less than the ER. 10 year return is more impressive, .09% in spite of higher ER in the past.
Both Vanguard and Blackrock/iShares are really on top of securities lending. Some of the BlackRock etfs overall are free to own or pay the shareholder to own them as a result.
The real winner in these sweepstakes is EEMS, ishares small cap emerging fund.

ER: .69%
Holding cost per Morningstar - -0.07%

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Re: International Small-cap Value Funds ??

Post by golfCaddy » Wed Jan 17, 2018 9:54 pm

In terms of value, Russia is by far the cheapest country by p/e ratio, so you could look for a Russia specific ETF.

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Re: International Small-cap Value Funds ??

Post by Johnnie » Wed Jan 17, 2018 10:08 pm

Also a Merriman-head, and have had DLS in a Roth for a couple years, during which is has rock-and-rolled.

Which is nice but I'm relieved to read here that its longer term performance has also been very good. I was a little bit uncomfortable because as has been noted it's not really a pure small cap value index. Tracks DFA well? That makes me feel even better.
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Re: International Small-cap Value Funds ??

Post by Theoretical » Thu Jan 18, 2018 12:10 am

Re DLS,

Larry Swedroe had an interesting article on ETF.com that discussed Shareholder Yield as a major and extremely robust value metric. Since most international companies haven't done much in the way of buybacks on the whole, the bulk of the SY comes from dividends. The way WisdomTree doesn't isn't just grabbing high dividend stocks and lumping them together. Their approach is much more oriented towards total payouts regardless of style box location.

In that sense, it is a small value fund.

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Re: International Small-cap Value Funds ??

Post by woof755 » Thu Jan 18, 2018 1:49 am

I was pleasantly surprised to see that EWX (SPDR Emerging Markets Small Cap ETF), which I use to supplement my VSS has a value tilt.

Though it's still likely more a mid/small cap fund than DFS.
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Re: International Small-cap Value Funds ??

Post by lazyday » Thu Jan 18, 2018 2:45 am

On NAV return vs the index a fund follows:
Theoretical wrote:
Wed Jan 17, 2018 5:59 pm
The real winner in these sweepstakes is EEMS, ishares small cap emerging fund.

ER: .69%
Holding cost per Morningstar - -0.07%
http://www.morningstar.com/InvGlossary/ ... -cost.aspx
Estimated Holding Cost measures the realized performance of an ETF manager relative to the benchmark index after all expenses both disclosed and undisclosed. This calculation measures predictable returns of the portfolio net asset value relative to the underlying index, isolating the information in past performance data predictive of how a fund will perform against its index in the future. The largest component is likely to be the fund's expense ratio and like an expense ratio, the estimated holding cost is expected to be a positive number that represents the extent to which a fund has underperformed its benchmark. A smaller or even negative estimated holding cost shows that a manager is doing a better job finding the lowest cost ways to replicate the benchmark index.

Many other data providers measure tracking error as the average deviation of fund returns from the benchmark index. Morningstar decomposes that traditional measure into two separate data points: estimated holding cost and tracking volatility. Our estimated holding cost captures the predictable drift from the total return version of the index due to both explicit and hidden costs and revenues, such as swap contract spreads, dividend withholding taxes, and securities lending. Our tracking volatility calculation isolates the risky, unpredictable deviations of performance from the index, which are typically caused by sampling or otherwise incomplete replication of the benchmark portfolio.
http://performance.morningstar.com/fund ... ture=en-US bottom of page
Total Cost & Risk EEMS
Estimated Holding Cost -0.07
Tracking Volatility 0.78
I don't know how to interpret these numbers, but am always skeptical of any data that comes from Morningstar.

Here's the data from ishares itself:
https://www.ishares.com/us/products/239 ... erformance

Code: Select all

		1y	3y	5y	10y	Incept.
Total Return (%) 33.97	8.01	4.86	-	3.65
Benchmark (%) 	33.84	8.44	5.41	2.78	4.26

Total return represents changes to the NAV and accounts for distributions from the fund.	
Index: MSCI Emerging Markets Small Cap Index	

Inception Date  Aug 16, 2011
They seem to have done a good job keeping up with the index after ER, but other than over the last 1 year, are still behind the index by a significant amount. Maybe this is just bad luck, or "Tracking Volatility" and the probabilistic expected value of fund outperformance to its index is .07% in the future.

I suppose we could gather old data from M* and see if their Estimated Holding Cost has been predictive or not.

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Re: International Small-cap Value Funds ??

Post by Longtermgrowth » Thu Jan 18, 2018 3:56 am

EEMS: besides what Morningstar reports, to find out holding cost after securities lending revenue, read the fund prospectus and negate net securities lending revenue from operating expenses. I can look at a prospectus and figure out within a margin of error the cost to hold after securities lending revenue, but triceratop is the source you want the definitive answer from :beer

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Re: International Small-cap Value Funds ??

Post by lazyday » Thu Jan 18, 2018 6:47 am

Longtermgrowth wrote:
Thu Jan 18, 2018 3:56 am
....negate net securities lending revenue from operating expenses
Of course this will leave out the hidden trading costs within the fund, as it trades when the index changes.

For example, in their first years, RAFI funds like SFENX, SFILX, and similar powershares ETFs fell far behind their indexes, in some cases by much more than the ER. It's hard to say how much of this is bad luck in tracking when the funds didn't hold the index exactly, and how much is due to expensive trading by the funds.

It seems that M* is trying to estimate something like this, which might be useful to someone choosing an ETF. But I'm skeptical.

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Re: International Small-cap Value Funds ??

Post by lazyday » Thu Jan 18, 2018 7:10 am

jhfenton wrote:
Wed Jan 17, 2018 8:38 am
(The one-year numbers can jump around a bit due to end-date inconsistencies.
Is there a way to deal with this? I look at NAV return vs index return, and focus on the longer term data. I guess you also look at other sources like etf.com to get slightly different date ranges.

Maybe when I expect to make a big decision, I could start collecting data for a few months, and average them out.

Today a large part of my portfolio is in RAFI largecap funds FNDE (EM) and FNDF (dev exUS). Someday I might move FNDE to largecap multifactor EMGF if I come to believe it has better factor exposure that's worth the higher cost, or that it actually has lower total costs. And might move some of FNDF to smallcap multifactor ISCF, when I find smallcap intl attractive.

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Re: International Small-cap Value Funds ??

Post by jhfenton » Thu Jan 18, 2018 3:02 pm

lazyday wrote:
Thu Jan 18, 2018 7:10 am
jhfenton wrote:
Wed Jan 17, 2018 8:38 am
(The one-year numbers can jump around a bit due to end-date inconsistencies.
Is there a way to deal with this? I look at NAV return vs index return, and focus on the longer term data. I guess you also look at other sources like etf.com to get slightly different date ranges.

Maybe when I expect to make a big decision, I could start collecting data for a few months, and average them out.

Today a large part of my portfolio is in RAFI largecap funds FNDE (EM) and FNDF (dev exUS). Someday I might move FNDE to largecap multifactor EMGF if I come to believe it has better factor exposure that's worth the higher cost, or that it actually has lower total costs. And might move some of FNDF to smallcap multifactor ISCF, when I find smallcap intl attractive.
The key is longer-term data. Over multiple years any first-day tracking issues or any first-year growing pains get averaged out.

One thing that causes end-date problems for Vanguard and most international mutual funds is fair value pricing. Indexes don't use fair-value pricing. They're based strictly on the market price of the basket of securities and currencies. Most international mutual funds use fair-value pricing to keep U.S. shareholders from exploiting market changes that occur after the underlying foreign market has closed but while the U.S. market is open. For most ETFs, that doesn't matter. Market prices automatically adjust, and NAV doesn't matter. But it matters for Vanguard, because most of their equity ETFs have mutual fund share classes, and those mutual fund shares classes are convertible to ETFs at NAV. So when Vanguard fair-value adjusts mutual fund prices, they fair-value adjust the reported ETF NAV.

Over multiple years, fair-value pricing doesn't impact the tracking efficiency, but it can show up on a single-year basis, if the first day or last day had a large adjustment.

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