Equity: Developed Europe - Small Cap

EUSC Top Performer Intra-day
Price $30.51
Today’s Change +0.18%(0.59)
4:00pm 11/20/2017
HEUS Bottom Performer Intra-day
Price $28.95
Today’s Change 0.00%(0.00)
4:00pm 11/20/2017
  • Overview
  • Efficiency
  • Tradability
  • Fit

ETF.com Insight

Investors have 4 distinct options for accessing smaller firms in developed Europe.

WisdomTree's DFE launched in 2006 and has proven extremely successful by almost everyEUSC weights stocks by dividends from eurozone countries, and adds a currency hedge measure. The fund has a huge asset base and trades briskly. DFE offers a dividend-focused take on space, holding only small-cap dividend payers and weighting those stocks by their annual cash distributions. The approach has performed well much of the fund's history.

Our only gripe with DFE is on sloppy index tracking, which means true holding costs have been at times considerably higher than its headline expense ratio. Still, DFE's size, liquidity and performance make a strong case for the fund.

EUSC, also from WisdomTree, selects and weights stocks by dividends as does DFE. However, it differs in key ways: The fund's exposure is solely to eurozone countries, a screen that weeds out the largest country in our benchmark: the UK. EUSC adds a currency hedge too, perhaps aiding in its considerable popularity since its March 2014 launch.

SMEZ launched in June 2014, and it's no match for DFE in size and liquidity. The fund charges a lower headline fee, is backed by a major issuer and offers straightforward market-cap-weighted exposure within its geographic confines, yet investors have largely shunned the offering so far. We see fund closure risk for SMEZ. The fund's exposure is solely to eurozone countries, and should appeal to those who believe that eurozone small-caps stocks will benefit from ECB policies, or who just want exposure to smaller firms from the European Monetary Union.

In September 2014, IEUS—formerly IFSM—joined the segment by narrowing its exposure from ex-US to Europe. The fund brings with it a modest asset base, and provides the purest exposure of the three funds—in fact, it tracks our benchmark index. Still, IEUS trades poorly, with very wide and volatile spreads at times. Limit orders are a must. (Insight updated 11/20/17)

All Funds (5)

IEUS $176.81 M 176811840 changed indexes Sept 2014

A 99
E
93
93
T
83
83
F
99
99

DFE $1.13 B 1126514550 large and liquid

C 81
E
77
77
T
80
80
F
81
81

EUSC $157.95 M 157948440 new, trade with care

C 36
E
76
76
T
68
68
F
36
36

SMEZ $24.56 M 24558734 trades poorly

D 61
E
73
73
T
54
54
F
61
61

HEUS $2.91 M 2911500 N/A

N/A 0
E
0
-1
T
0
-1
F
0
-1

ETF.com Grade as 11/16/17

Equity: Developed Europe - Small Cap

1 Year Total Return NAV
Performance  [as of 11/17/17] 1 Month 3 Month YTD 1 Year 3 Years 5 Years 10 Years
Benchmark: MSCI Europe Small Cap-1.66%2.93%27.74%33.41%12.11%15.17%--
A 99.211242IEUS176811840IEUSiShares MSCI Europe Small-Cap ETF-1.83%4.10%27.92%34.48%12.37%13.36%3.95%
C 80.734742DFE1126514550DFEWisdomTree Europe SmallCap Dividend Fund-3.76%2.16%25.70%32.95%13.04%17.03%4.78%
C 35.636964EUSC157948440EUSCWisdomTree Europe Hedged SmallCap Equity Fund-1.76%2.77%19.22%28.86%------
D 60.635829SMEZ24558734SMEZSPDR EURO STOXX Small Cap ETF-1.97%2.42%33.27%41.26%9.92%----
N/A 0HEUS2911500HEUSiShares Currency Hedged MSCI Europe Small-Cap ETF-1.35%3.50%19.18%24.41%------
All returns over 1 year are annualized. All returns are total returns unless otherwise stated.

ETF.com Efficiency Insight

This small segment offers clear choices regarding the risks, and to a lesser extent, costs, of fund ownership. In short, DFE is the successful well-established segment giant, EUSC is aSMEZ is hard to recommend given its fund closure risk successful upstart, SMEZ is a another new entrant with far less success in asset gathering to date, and IEUS is small but established fund that changed indexes in 2014 to land itself in this peer group.

While DFE dominates thoroughly in AUM, EUSC, launched in March 2014, has gathered an impressive asset base. In contrast, SMEZ, launched 3 months later, simply hasn’t gained any traction—to the point where the fund’s viability going forward is in question. IEUS has more assets than SMEZ and while we don’t see closure risk for IEUS as of this writing, it might not pass some investors’ screens for minimum AUM.

DFE charges a higher fee, and its very wobbly tracking means that holding costs are hard to predict and have been considerably more than its fee for recent 1 year periods. Poor tracking is especially puzzling given that the fund tracks a WisdomTree index of its own design. EUSC also charges a higher fee.

In all DFE, EUSC and IEUS offer reasonable costs and risk of ownership, with some cost uncertainty with DFE and some qualms on asset size for IEUS. In contrast, SMEZ is hard to recommend given its fund closure risk. (Insight updated 11/20/17)

All Funds (5)

93
92.922969
77
77.44526
76
75.785881
73
73.251497
N/A
0

ETF.com Grade as 11/16/17

Equity: Developed Europe - Small Cap

Tracking Difference (12 Month)

Ticker Expense Ratio Median Max. Upside Max. Downside Max LT/ST Cap Gains Rate Rule Legal Structure Fund Closure Risk Efficiency
DFE WisdomTree Europe SmallCap Dividend Fund 0.58% -0.70% 0.55% -1.10% 20.00% / 39.60% Low 77.44526
EUSC WisdomTree Europe Hedged SmallCap Equity Fund 0.58% -0.83% -0.04% -1.41% 20.00% / 39.60% Low 75.785881
HEUS iShares Currency Hedged MSCI Europe Small-Cap ETF 0.43% -- -- -- 20.00% / 39.60% High 0
IEUS iShares MSCI Europe Small-Cap ETF 0.40% 0.10% 0.28% -0.24% 20.00% / 39.60% Low 92.922969
SMEZ SPDR EURO STOXX Small Cap ETF 0.45% -0.16% 0.18% -1.08% 20.00% / 39.60% High 73.251497

ETF.com Tradability Insight

DFE is the clear winner for liquidity. The fund has first-mover advantage, and its weighty AUM makes for plenty of outstanding shares to trade every day. Spreads have remained tight at theDFE is the clear winner for liquidity very times where they’ve widened radically for peer funds, and doubtless are tighter than the aggregate weight of the underlying basket.

Trading DFE in size may be more challenging due to weaker underlying volume. That means trades at the largest size—creations and redemptions—may produce adverse price impact. Its competitors are not immune from this either.

EUSC however can also be traded fairly. The fund has decent volume, and spreads are manageable and relatively stable.

SMEZ and IEUS are no match for DFE in trading volume, and IEUS in particular has seen extremely wide and variable spreads at times. Use limit orders for both funds—not market orders—set close to intraday NAV. Trading early in the New York day (but not right at the open) while European exchanges are open will help to make iNAV more accurate and useful. (Insight updated 11/20/17)

All Funds (5)

83
82.924604
80
80.207248
68
67.66685
54
54.158158
N/A
0

ETF.com Grade as 11/16/17

Equity: Developed Europe - Small Cap

Ticker Median Daily Volume ($) Average Spread Creation Unit/Day Market Hours Overlap Underlying Volume/Unit % Creation Cost Per Unit (%) Impediment to Creations Score - Tradability
DFE WisdomTree Europe SmallCap Dividend Fund $4.18 M 0.07% 1.22 30.00% 0.75% 0.09% None 80.207248
EUSC WisdomTree Europe Hedged SmallCap Equity Fund $448.68 K 0.11% 0.29 32.00% 0.22% 0.13% None 67.66685
HEUS iShares Currency Hedged MSCI Europe Small-Cap ETF $0 0.62% 0 100.00% 138.06% 0.01% None 0
IEUS iShares MSCI Europe Small-Cap ETF $1.06 M 0.14% 0.38 31.00% 0.12% 0.12% None 82.924604
SMEZ SPDR EURO STOXX Small Cap ETF $124.57 K 0.25% 0.04 32.00% 0.35% 0.05% None 54.158158
Spread History
Premium/Discount History

ETF.com/ Block Liquidity

IEUS
5
4
3
2
1
DFE
5
4
3
2
1
EUSC
5
4
3
2
1
SMEZ
5
4
3
2
1
HEUS
5
4
3
2
1

This measurement shows how easy it is to trade 25,000 shares of each ETF.

ETF.com Fit Insight

The 4 ETFs here offer materially different exposures to the small-cap developed Europe space. DFE is a pure dividend take on the space: It holds only dividend-paying firms, and weightsSMEZ and EUSC exclude European countries that don't use the euro those stocks by the cash they’ve paid out annually. UK firms dominate, as they do in our benchmark. DFE also overweights Sweden, which, together with the UK and Switzerland, forms almost half of the exposure. The fund delivers arguably better focus on small-caps by size than our benchmark, which strays into midcap coverage. DFE easily beats our benchmark on yield based on the portfolio yield, gross of fees.

SMEZ delivers more straightforward cap weighting, but the universe of stocks that it pulls from ensures that SMEZ performance will differ from our benchmark and from rival DFE. In short, SMEZ excludes European countries that don’t use the euro, which means Switzerland, Sweden and, crucially, the UK, which dominates our benchmark. SMEZ makes up the difference with extra weight (relative to our benchmark) to France, Germany and Italy. Still, it could appeal to investors looking for a eurozone growth theme bolstered by tail winds from the ECB’s easy money policies.

EUSC is something of a mash-up of DFE and SMEZ. EUSC has DFE’s dividend selection and weighting but confines itself to eurozone countries. Most importantly perhaps, EUSC adds a currency hedge to the mix, ensuring further discord with our benchmark. These factors explain a weak Fit to our benchmark.

In contrast, IEUS tracks the same index we've chosen as a benchmark. That means pure-play exposure and a near-perfect Fit score. Take note that the index includes a large number of firms that we classify as midcaps, though the weighted average market cap is still in the small-cap range. Note too the fund’s performance record includes many years tracking a quite different index: IEUS changed indexes in September 2014. (Insight updated 11/20/17)

All Funds (5)

99
99.211242
81
80.734742
61
60.635829
36
35.636964
N/A
0

ETF.com Grade as 11/16/17

Equity: Developed Europe - Small Cap