Emerging markets small-cap “value” ETF launched today

WisdomTree’s Emerging Markets SmallCap Dividend ETF (ticker DGS) started trading today. This ETF, which tracks the WisdomTree Emerging Markets SmallCap Dividend Index, demonstrates a significant “value” tilt.

In my opinion, this ETF appears to be the closest thing to the “emerging market” “smallcap” and “value” asset class available currently to retail investors (I do not consider DFA funds to be easily available to retail investors). According to the fact sheet [PDF], this ETF has an expense ratio of 0.63%, which I think is quite reasonable considering the equity markets it is targetting.

2007-10-29-dgs.png

The top 10 countries, as of Oct 26, 2007, were

Taiwan 23.38%
South Africa 14.16%
Korea 12.36%
Thailand 11.11%
Malaysia 10.87%
Israel 9.05%
Turkey 4.20%
Mexico 2.83%
Indonesia 2.63%
Chile 2.60%

This ETF has a dividend yield of more than 4%. From my experience with the VWO ETF, a significant portion (say 40%) will probably be considered as not “qualified” for the lower dividend tax rate by the IRS. As such, this fund will not be very tax efficient in held in a taxable account.

At the time of this post, this ETF is trading with a spread of four cents, with the asking price at $51.62 and bidding price of $51.58. Taking the NAV to be $51.60, the “spread cost” is a very reasonable 0.02/51.6 = 0.039%.

The figure below shows this morning’s trading action (up until the time of this post):

2007-10-30-dgs-trades.png

I will be watching this ETF closely to see if it fits into my existing portfolio.

The related Bogleheads discussion can be found HERE.

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