At SPDR ETFs, we recently passed the 2-year anniversary since the adoption of the S&P Emerging Markets High Yield Dividend Aristocrats® Index as the benchmark for our SPDR® S&P® Emerging Markets Dividend Aristocrats UCITS ETF.1 To learn more about the ETF, and to view its full performance history, please visit its fund page.
In the past 5 years, the market capitalisation-weighted MSCI Emerging Markets Index has been driven by the rally in hyper-growth stocks that have benefited from the structural shift in the global economy. Similar to the highly covered FAANG complex in US equites, the MSCI Emerging Markets Index has experienced a concentration in return contribution from stocks in the consumer discretionary (Alibaba), technology (Taiwan Semiconductor, Samsung) and communication services (Tencent) sectors (see Figure 1).*
Much of the strong performance for the MSCI Emerging Markets Index is attributable to the large position of Alibaba Group in the market-capitalisation weighted index and its strong performance during the referenced time period. Over the 5 years from 31 January 2017, Alibaba made up c. 24% of the market benchmark on average and is up 107%. This position contributed 24.62 of the 57.56 estimated nominal return (and explains c. 42%). Alibaba does not pay a dividend and has traded at an average P/E of 36.7x and P/B of 6.5x over the last 5 years.2 In retrospect, the environment was beneficial for indices holding high growth stocks, such as Alibaba.
In the 2 years since our SPDR® S&P® Emerging Markets Dividend Aristocrats UCITS ETF switched to tracking the newly created Dividend Aristocrats® Index (February 2020), our strategy has performed neutral with the market benchmark MSCI Emerging Markets Index, with both advancing by 5.5% over that time.3 On a year-to-date basis, the SPDR® S&P® Emerging Markets Dividend Aristocrats UCITS ETF has outperformed the market benchmark MSCI Emerging Markets Index by 4.07% (see Figure 2). Much of the positive contribution can be explained by the more recent reversal in the growth/value trade, as well as strong stock selection in real estate, where the Dividend Aristocrats standard appears to be beneficial.
The focus of Dividend Aristocrats on dividend stability would have decreased the historical yield of the portfolio – Dividend Aristocrats is arguably a more conservative approach – but the new index would still have provided a yield premium to the market, on a back-tested basis (see Figure 3). The index yield premium has expanded since the beginning of 2020. The S&P Emerging Markets High Yield Dividend Aristocrats® Index also offers a significant amount active value factor exposure. Value is the third strongest exposure after yield and size (see Figure 4).
1 Prior to 7 February 2020, the ETF was benchmarked to the S&P Emerging Markets Dividend Opportunities Index. The S&P Emerging Markets High Yield Dividend Aristocrats® Index was incepted on 30 August 2019.
2 Source: FactSet, as of 22 February 2022.
3 Source: FactSet, as of 28 February 2022. Performance since index change 7 February 2020.
* This information should not be considered a recommendation to invest in a particular sector or to buy or sell any security shown.
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For Investors in Austria: The offering of SPDR ETFs by the Company has been notified to the Financial Markets Authority (FMA) in accordance with section 139 of the Austrian Investment Funds Act. Prospective investors may obtain the current sales Prospectus, the articles of incorporation, the KIID as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. T: +49 (0)89-55878-400.F: +49 (0)89-55878-440.
For Investors in Finland: The offering of funds by the Companies has been notified to the Financial Supervision Authority in accordance with Section 127 of the Act on Common Funds (29.1.1999/48) and by virtue of confirmation from the Financial Supervision Authority the Companies may publicly distribute their Shares in Finland. Certain information and documents that the Companies must publish in Ireland pursuant to applicable Irish law are translated into Finnish and are available for Finnish investors by contacting State Street Custodial Services (Ireland) Limited, 78 Sir John Rogerson’s Quay, Dublin 2, Ireland.
For Investors in France: This document does not constitute an offer or request to purchase shares in the Company. Any subscription for shares shall be made in accordance with the terms and conditions specified in the complete Prospectus, the KIID, the addenda as well as the Company Supplements. These documents are available from the Company centralizing correspondent: State Street Banque S.A., Coeur Défense - Tour A - La Défense 4 33e étage 100, Esplanade du Général de Gaulle 92 931 Paris La Défense cedex France or on the French part of the site ssga.com/etfs. The Company is an undertaking for collective investment in transferable securities (UCITS) governed by Irish law and accredited by the Central Bank of Ireland as a UCITS in accordance with European Regulations. European Directive no. 2014/91/EU dated 23 July 2014 on UCITS, as amended, established common rules pursuant to the cross-border marketing of UCITS with which they duly comply. This common base does not exclude differentiated implementation. This is why a European UCITS can be sold in France even though its activity does not comply with rules identical to those governing the approval of this type of product in France.The offering of these compartments has been notified to the Autorité des Marchés Financiers (AMF) in accordance with article L214-2-2 of the French Monetary and Financial Code.
For Investors in Germany: The offering of SPDR ETFs by the Companies has been notified to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) in accordance with section 312 of the German Investment Act. Prospective investors may obtain the current sales Prospectuses, the articles of incorporation, the KIIDs as well as the latest annual and semi-annual report free of charge from State Street Global Advisors Europe Limited, Branch in Germany, Brienner Strasse 59, D-80333 Munich. Telephone: +49 (0)89-55878-400. Facsimile: +49 (0)89-55878-440.
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Norway: The offering of SPDR ETFs by the Companies has been notified to the Financial Supervisory Authority of Norway (Finanstilsynet) in accordance with applicable Norwegian Securities Funds legislation. By virtue of a confirmation letter from the Financial Supervisory Authority dated 28 March 2013 (16 October 2013 for umbrella II) the Companies may market and sell their shares in Norway.
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United Kingdom: The Funds have been registered for distribution in the UK pursuant to the UK’s temporary permissions regime under regulation 62 of the Collective Investment Schemes (Amendment etc.) (EU Exit) Regulations 2019. The Funds are directed at 'professional clients' in the UK (as defined in rules made under the Financial Services and Markets Act 2000) who are deemed both knowledgeable and experienced in matters relating to investments. The products and services to which this communication relates are only available to such persons and persons of any other description should not rely on this communication. Many of the protections provided by the UK regulatory system do not apply to the operation of the Funds, and compensation will not be available under the UK Financial Services Compensation Scheme.
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Value Stocks: The value style of investing that emphasizes undervalued companies with characteristics for improved valuations, which may never improve and may actually have lower returns than other styles of investing or the overall stock market.
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