The Schwab Fundamental Emerging Markets Equity ETF (FNDE) was launched on 08/13/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

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.

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

FNDE is managed by Charles Schwab, and this fund has amassed over $6.69 billion, which makes it one of the largest ETFs in the Broad Emerging Market ETFs. This particular fund seeks to match the performance of the Russell RAFI Emerging Markets Large Co. Index (Net) before fees and expenses.

The RAFI Fundamental High Liquidity Emerging Markets Index measures the performance of large sized companies, based on their fundamental size and weight, in emerging market countries.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.39% for FNDE, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 3.87%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Taiwan Semiconductor Manufacturing accounts for about 4.76% of the fund's total assets, followed by Hon Hai Precision Industry Ltd and China Construction Bank Corp H.

The top 10 holdings account for about 23.44% of total assets under management.

Performance and Risk

The ETF return is roughly 19.76% so far this year and was up about 29.52% in the last one year (as of 10/21/2024). In the past 52-week period, it has traded between $25.33 and $33.95.

The fund has a beta of 0.75 and standard deviation of 17.04% for the trailing three-year period, which makes FNDE a medium risk choice in this particular space. With about 423 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab Fundamental Emerging Markets Equity ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard FTSE Emerging Markets ETF has $84.38 billion in assets, iShares Core MSCI Emerging Markets ETF has $84.72 billion. VWO has an expense ratio of 0.08% and IEMG charges 0.09%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Schwab Fundamental Emerging Markets Equity ETF (FNDE): ETF Research Reports

iShares Core MSCI Emerging Markets ETF (IEMG): ETF Research Reports

Vanguard FTSE Emerging Markets ETF (VWO): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research