John Hancock Multifactor Emerging Markets ETF (JHEM) seeks to track a multifactor index that measures emerging market stocks selected and weighted based on quality, value, momentum, and low volatility characteristics. This emerging markets equity ETF provides exposure to companies in developing economies across Asia, Latin America, Eastern Europe, and Africa.
How It Works
JHEM uses a rules-based approach that screens emerging market stocks across multiple quantitative factors including earnings quality, price-to-book ratios, price momentum, and earnings volatility. The fund weights holdings based on factor scores rather than market capitalization, potentially overweighting stocks with stronger fundamental characteristics. Rebalancing occurs semi-annually to maintain factor exposures and adjust for changing market conditions. The multifactor methodology aims to capture risk premiums while reducing concentration in any single factor.
Key Features
- Multifactor approach combines quality, value, momentum, and low volatility screens to potentially enhance risk-adjusted returns versus cap-weighted emerging market ETFs
- Factor-based weighting may reduce exposure to overvalued large-cap stocks that dominate traditional emerging market indices
- Launched in 2018 with 2.04% dividend yield, providing income potential alongside capital appreciation from emerging market growth
Risks
- This ETF can lose value when emerging market currencies weaken against the dollar, potentially reducing returns by 10-20% during currency crises
- Factor tilts may underperform during periods when growth stocks outpace value or quality metrics, creating tracking error versus broad emerging market indices
- Emerging market volatility can cause 40-60% declines during global risk-off periods, with slower recovery than developed market equivalents
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for investors with 7+ year time horizons seeking enhanced emerging market exposure with factor-based risk management. High risk tolerance required due to emerging market volatility and currency exposure. Appropriate for investors wanting alternatives to traditional cap-weighted emerging market ETFs.