Emerging Global Advisors (EGA), the investment advisor to the EGShares suite of emerging markets (EM) exchange-traded funds (ETF), has made changes to its suite of income-oriented ETFs.
Effective 26 January, 2015, the EGShares Low Volatility Emerging Markets Dividend ETF (Ticker: HILO) will begin tracking the self-indexed EGAI Emerging Markets Quality Dividend Index and will be renamed the EGShares EM Quality Dividend ETF. The fund’s ticker will remain unchanged.
The EGShares EM Quality Dividend ETF incorporates a rules-based strategy designed to provide investors with a core emerging market equity solution that focuses on total return through higher income. It tests for such fundamental factors as return-on-equity, positive earnings growth and three-year dividend consistency.
“We have learned a great deal about investor preferences for equity income and concluded that while higher yields were attractive, dividend quality and consistency are at least as important,” says Robert Holderith, President and Founder of EGA. "To that end, HILO's new investment strategy seeks to do exactly that.”
"Dividends play an important role in EM investing,” says Nicholas Smithie, Chief Investment Strategist at EGA. “Nearly 40% of total return in emerging markets has come from dividends over the last 27 years, and this income is an important source of growth and stability for the long-term investor.1 By considering such factors as corporate earnings growth and return on equity, we bring a sharper focus to the sustainability of those dividends and the potential for total return."
In line with the firm’s efforts to periodically streamline its offering, EGA also announced that the Board of Trustees of the EGA Emerging Global Shares Trust has authorised the liquidation of two smaller dividend-related ETFs, the EGShares Emerging Markets Dividend Growth ETF (Ticker: EMDG) and the EGShares EM Dividend High Income ETF (Ticker: EMHD). Collectively, these funds represent less than 1% of total assets under management. 2 Trading on the NYSE Arca for the shares of these two Funds will be suspended prior to the open of business on Friday, 26 December, 2014.
Shareholders may sell their holdings on or before Wednesday, 24 December, 2014 and may incur customary brokerage charges. Shareholders who do not sell their holdings on or before Wednesday, December 24, 2014 will receive cash equal to the amount of the net asset value of their shares. The liquidating distributions are expected to be paid on or about 31 December, 2014. The Advisor will bear all legal and administrative expenses associated with these Fund closures.