Is WisdomTree Japan Hedged Equity ETF (DXJ) a Strong ETF Right Now?
Smart Beta ETF report for DXJ
A smart beta exchange traded fund, the WisdomTree Japan Hedged Equity ETF (DXJ) debuted on 06/16/2006, and offers broad exposure to the Asia-Pacific (Developed) ETFs category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
Because the fund has amassed over $2.06 billion, this makes it one of the larger ETFs in the Asia-Pacific (Developed) ETFs. DXJ is managed by Wisdomtree. DXJ seeks to match the performance of the WisdomTree Japan Hedged Equity Index before fees and expenses.
The WisdomTree Japan Hedged Equity Index is designed to provide exposure to Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese Yen movements relative to the U.S. dollar.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for DXJ are 0.48%, which makes it on par with most peer products in the space.
DXJ's 12-month trailing dividend yield is 2.56%.
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, Toyota Motor Corp accounts for about 5.50% of total assets, followed by Mitsubishi Ufj Financial Group and Sumitomo Mitsui Financial Group.
The top 10 holdings account for about 31.36% of total assets under management.
Performance and Risk
So far this year, DXJ has added about 2.52%, and was up about 22.64% in the last one year (as of 01/06/2022). During this past 52-week period, the fund has traded between $55.27 and $65.19.
DXJ has a beta of 0.77 and standard deviation of 23% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 410 holdings, it effectively diversifies company-specific risk.
WisdomTree Japan Hedged Equity ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $7.74 billion in assets, iShares MSCI Japan ETF has $11.98 billion. BBJP has an expense ratio of 0.19% and EWJ charges 0.51%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) ETFs.
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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WisdomTree Japan Hedged Equity ETF (DXJ): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
JPMorgan BetaBuilders Japan ETF (BBJP): ETF Research Reports
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