Invesco FTSE EM High Dividend Low Volatility UCITS ETF

Issuer: Invesco

Asset Class: Equity

TER: 49bps

Trading Currency: GBX

Pays Income: False

Listing Date: 31 May 2016

Ticker: HDEM

ISIN: IE00BYYXBF44

This fund offers a strategic approach to emerging market investing by focusing on a dual-factor, smart beta methodology. It is designed to track an index composed of companies from developing economies that have historically exhibited both high dividend yields and low price volatility. The objective is to provide investors with exposure to the growth potential inherent in emerging markets while aiming to mitigate some of the associated turbulence. By systematically selecting stocks based on these two specific financial characteristics, the fund seeks to deliver a combination of regular income and a more defensive risk profile compared to conventional, market-capitalisation-weighted emerging market indices. The portfolio is physically replicated, meaning it directly holds the underlying securities of the index.

This investment is well-suited for individuals looking for a core emerging markets equity holding with a defensive tilt. The emphasis on low volatility may appeal to risk-averse investors who are cautious about the price swings often seen in developing countries. Simultaneously, the focus on high dividend yields makes it an attractive option for those seeking to generate a consistent income stream from their international portfolio allocation. It can serve as a powerful tool for diversifying income sources beyond traditional developed markets and asset classes, offering a blend of potential capital appreciation and enhanced yield.

While the fund provides access to the compelling long-term growth narrative of emerging economies, it is not without risks. The smart beta strategy may cause it to underperform broad market benchmarks during strong, risk-on market rallies where high-growth, more volatile stocks tend to lead. Furthermore, investors are exposed to the inherent political, economic, and currency risks associated with investing in developing nations. The fund's performance will be influenced by fluctuations in foreign exchange rates, which can impact overall returns.