The Schwab Fundamental Emerging Markets Equity ETF (FNDE) made its debut on 08/13/2013, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Managed by Charles Schwab, FNDE has amassed assets over $6.25 billion, making it one of the largest ETFs in the Broad Emerging Market ETFs. FNDE 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 4.75%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 5.47% 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 25.75% of total assets under management.

Performance and Risk

Year-to-date, the Schwab Fundamental Emerging Markets Equity ETF return is roughly 13.85% so far, and it's up approximately 16.47% over the last 12 months (as of 12/25/2024). FNDE has traded between $25.58 and $33.95 in this past 52-week period.

The fund has a beta of 0.74 and standard deviation of 17.20% 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.

IShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index and the Vanguard FTSE Emerging Markets ETF (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index. IShares Core MSCI Emerging Markets ETF has $79.15 billion in assets, Vanguard FTSE Emerging Markets ETF has $79.74 billion. IEMG has an expense ratio of 0.09% and VWO charges 0.08%.

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.

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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

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