TSM - DGRE Dropped China In 2023
2023-07-14 08:00:00 ET
Summary
- WisdomTree Emerging Markets Quality Dividend Growth Fund ETF is an actively managed fund.
- It has dropped Chinese stocks, cutting exposure to geopolitical risks.
- Technology represents about 25% of assets.
- Regarding performance, it is a bit ahead of the emerging markets benchmark iShares MSCI Emerging Markets ETF.
This article series aims at evaluating ETFs (exchange-traded funds) regarding past performance and portfolio metrics. Reviews with updated data are posted when necessary.
DGRE strategy and portfolio
WisdomTree Emerging Markets Quality Dividend Growth Fund ETF ( DGRE ) started investing operations on 08/01/2013. It changed strategies on October 19, 2018, as noted on its presentation page . Before this date, it was tracking the WisdomTree Emerging Markets Quality Dividend Growth Index. Then, it became an actively managed fund. Therefore, historical data prior to 10/19/2018 are useless, and possibly misleading, to assess the current strategy. The fund has 273 holdings, a distribution yield of 2.61% and an expense ratio of 0.32%. Distributions are paid quarterly. The net asset value (about $100 million) and the average trading volume (about 16k shares/day) are quite low for an ETF.
As described by WisdomTree, the fund “ is actively managed using a model-based approach. ” It implements “ a long-term approach to investing, seeks to identify dividend-paying companies with strong corporate profitability and sustainable growth characteristics. ” Such a description offers a lot of flexibility to the managers. On the downside, the strategy rules are a black box that we can’t back-test or duplicate.
The fund is mostly invested in large and mega cap companies (about 77% of asset value). The heaviest country is India (25.5%), followed by Taiwan (17.5%) and South Korea (14.7%). Other countries are below 7%. In my review of February , China was the top country with 28.5%. It has almost disappeared from the portfolio, with a residual weight of only 0.15%. Hong Kong, which was at about 3%, has also disappeared. Therefore, exposure to geopolitical and regulatory risks related to China is considerably lower than 5 months ago.
The heaviest sector is technology (24.6%), followed by financials (14%) and industrials (12.2%). Other sectors are below 11%.
DGRE sector breakdown (chart: author; data: WisdomTree)
The top 10 holdings, listed below, represent 18.3% of asset value. The top two name are Taiwan Semiconductor Manufacturing Company Limited ( TSM ) and Samsung Electronics Co (SSNLF), with 6.46% and 3.88%, respectively. Risks related to other individual companies are low.
| Name |
| Ticker |
| Weight |
| Taiwan Semiconductor Manufacturing Co Ltd |
| 2330 TT |
| 6.46% |
| Samsung Electronics Co Ltd |
| 005930 KS |
| 3.88% |
| Reliance Industries Ltd |
| RIL IB |
| 1.76% |
| Infosys Ltd |
| INFO IB |
| 1.06% |
| Grupo Bimbo SAB de CV |
| BIMBOA MM |
| 0.99% |
| Vale SA |
| VALE3 BS |
| 0.90% |
| Tata Consultancy Services Ltd |
| TCS IB |
| 0.87% |
| Samsung Electronics-Pref |
| 005935 KS |
| 0.85% |
| Ford Otomotiv Sanayi AS |
| FROTO TI |
| 0.80% |
| America Movil Sab De Cv |
| AMXB MM |
| 0.77% |
Past performance compared to competitors
The next chart compares total returns of DGRE and four other emerging markets funds (since 10/19/2018):
- iShares MSCI Emerging Markets ETF ( EEM )
- WisdomTree Emerging Markets High Dividend Fund ( DEM )
- Global X MSCI SuperDividend Emerging Markets ETF (SDEM)
- WisdomTree Emerging Markets SmallCap Dividend Fund ( DGS ).
DGRE vs. Emerging Market ETFs since Oct. 2018 (Seeking Alpha)
DGRE performance is average in this group. In this time frame, it is about 5% ahead of the broad emerging market fund EEM. The best performer is the small cap fund DGS, and the worst one is the high-yield fund SDEM.
In 2023 to date, DGRE is among the best performers, almost on par with DGS and DEM:
Without distributions, the share price return since the reshuffling is almost flat. It has closely followed the emerging market benchmark EEM.
After the fund became actively managed, distributions went up from $0.61 per share in 2019 to $0.93 in 2022. It is a total growth rate of 52.5%, beating by far the cumulative inflation of 15.5% in the same time interval (based on CPI). However, this short period might not be representative of future dividend growth.
Distribution per share (Seeking Alpha)
Takeaway
WisdomTree Emerging Markets Quality Dividend Growth Fund ETF is an actively managed fund invested in dividend stocks listed in emerging markets. It started in 2013, but only data from October 2018 must be taken into account to assess the current strategy. India is the heaviest country in asset value. China and Hong Kong have disappeared from the portfolio in 2023, which has considerably cut the fund's exposure to geopolitical risks. Technology represents almost 25% of assets. After it was reshuffled, DGRE has brought a 5% excess return in 4.5 years over the emerging market benchmark EEM, mostly through distributions.
For further details see:
DGRE Dropped China In 2023