Making its debut on 06/16/2006, smart beta exchange traded fund WisdomTree Japan Hedged Equity ETF (DXJ) provides investors broad exposure to the Asia-Pacific (Developed) ETFs category of the market.
What are smart beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund sponsor and index
Because the fund has amassed over $4.12 billion, this makes it one of the larger ETFs in the Asia-Pacific (Developed) ETFs. DXJ is managed by Wisdomtree. DXJ seeks to match the performance of the WisdomTree Japan Hedged Equity Index before fees and expenses.
The WisdomTree Japan Hedged Equity Index is designed to provide exposure to Japanese equity markets while at the same time neutralizing exposure to fluctuations of the Japanese Yen movements relative to the U.S. dollar.
Cost and other expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for DXJ are 0.48%, which makes it on par with most peer products in the space.
It’s 12-month trailing dividend yield comes in at 3.29%.
Sector exposure and top holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Us Dollar accounts for about 53.79% of total assets, followed by Dreyfus Trsy Oblig Cash Mgmt Cl Ins and Mitsubishi Ufj Financial Group.
The top 10 holdings account for about 127.03% of total assets under management.
Performance and risk
The ETF has added about 21.75% and is up about 25.8% so far this year and in the past one year (as of 10/08/2025), respectively. DXJ has traded between $95.74 and $133.17 during this last 52-week period.
The ETF has a beta of 0.41 and standard deviation of 19.46% for the trailing three-year period, making it a medium risk choice in the space. With about 436 holdings, it effectively diversifies company-specific risk .
Alternatives
WisdomTree Japan Hedged Equity ETF is a reasonable option for investors seeking to outperform the Asia-Pacific (Developed) ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
JPMorgan BetaBuilders Japan ETF (BBJP) tracks MORNINGSTAR JAPAN TRGT MRKT EXPOSURE ID and the iShares MSCI Japan ETF (EWJ) tracks MSCI Japan Index. JPMorgan BetaBuilders Japan ETF has $14.21 billion in assets, iShares MSCI Japan ETF has $15.59 billion. BBJP has an expense ratio of 0.19% and EWJ changes 0.50%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Asia-Pacific (Developed) ETFs.
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