Dimensional Emerging Markets High Profitability ETF (DEHP) seeks to track emerging markets companies with high profitability characteristics, focusing on firms with strong return on assets and robust earnings relative to book value. This equity ETF provides exposure to profitable companies across developing economies including China, India, Taiwan, and other emerging market nations.
How It Works
DEHP uses Dimensional's proprietary methodology to identify and weight emerging markets stocks based on profitability metrics, emphasizing companies with sustainable earnings and efficient asset utilization. The fund employs a rules-based approach that screens for high return on assets and earnings-to-book ratios, then applies market-cap weighting within the profitable universe. Portfolio construction focuses on larger, more liquid emerging markets securities while maintaining broad country diversification across the emerging markets spectrum.
Key Features
- Applies rigorous profitability screening to emerging markets, potentially reducing exposure to unprofitable growth companies common in developing economies
- Launched in 2022 by Dimensional, leveraging decades of academic research on profitability as a return driver in emerging markets
- Offers 1.88% dividend yield while focusing on profitable companies, providing both income and quality characteristics in volatile markets
Risks
- This ETF can lose value significantly during emerging markets selloffs, potentially declining 40-60% during global risk-off periods or currency crises
- Profitability screening may cause underperformance during growth rallies when investors favor unprofitable but rapidly expanding emerging markets companies
- Currency fluctuations can substantially impact returns as underlying holdings are denominated in local currencies without hedging protection for U.S. investors
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for experienced investors with 7+ year time horizons seeking quality-focused emerging markets exposure. High risk tolerance required due to emerging markets volatility. Appropriate for investors who want emerging markets diversification but prefer profitable companies over pure growth exposure.