A smart beta exchange traded fund, the WisdomTree International Hedged Quality Dividend Growth ETF (IHDG) debuted on 05/07/2014, and offers broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Wisdomtree, IHDG has amassed assets over $952.38 million, making it one of the larger ETFs in the Broad Developed World ETFs. IHDG, before fees and expenses, seeks to match the performance of the WisdomTree International Hedged Quality Dividend Growth Index.
The WisdomTree International Hedged Quality Dividend Growth Index is designed to provide exposure to the developed market companies while at the same time neutralizing exposure to fluctuations between the value of foreign currencies and the U.S. dollar.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.58% for this ETF, which makes it one of the more expensive products in the space.
IHDG's 12-month trailing dividend yield is 2.18%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Rio Tinto Plc (NYSE:RIO) accounts for about 6.49% of total assets, followed by Bhp Group Ltd (BHP) and Unilever (NYSE:UL) Plc (ULVR).
The top 10 holdings account for about 42.88% of total assets under management.
Performance and Risk
Year-to-date, the WisdomTree International Hedged Quality Dividend Growth ETF return is roughly 8.45% so far, and was up about 34.10% over the last 12 months (as of 05/17/2021). IHDG has traded between $33.20 and $43.53 in this past 52-week period.
The fund has a beta of 0.70 and standard deviation of 19.29% for the trailing three-year period, which makes IHDG a medium risk choice in this particular space. With about 390 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree International Hedged Quality Dividend Growth ETF is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares Core Dividend Growth ETF (DGRO) tracks Morningstar US Dividend Growth Index and the Vanguard Dividend Appreciation ETF (VIG) tracks NASDAQ US Dividend Achievers Select Index. IShares Core Dividend Growth ETF has $18.91 billion in assets, Vanguard Dividend Appreciation ETF has $58.99 billion. DGRO has an expense ratio of 0.08% and VIG charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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WISTR-INT HDG (IHDG): ETF Research Reports
BHP Group (NYSE:BHP) Limited Sponsored ADR (BHP): Free Stock Analysis Report
Rio Tinto PLC (RIO): Free Stock Analysis Report
ISHRS-CORE DG (DGRO): ETF Research Reports
VANGD-DIV APPRC (VIG): ETF Research Reports
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