The Schwab Fundamental Emerging Markets Equity ETF (FNDE) made its debut on 08/13/2013, and is a smart beta exchange traded fund that provides broad exposure to the Broad Emerging Market 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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 & Index
The fund is managed by Charles Schwab, and has been able to amass over $9.4 billion, which makes it one of the largest ETFs in the Broad Emerging Market ETFs. FNDE, before fees and expenses, seeks to match the performance of the Russell RAFI Emerging Markets Large Co. Index (Net).
The RAFI Fundamental High Liquidity Emerging Markets Index measures the performance of large sized companies, based on their fundamental size and weight, in emerging market countries.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.39%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.69%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Taiwan Semiconductor Manufacturingaccounts for about 6.34% of the fund's total assets, followed by Hon Hai Precision Industry Ltd and Vale Sa (VALE3).
FNDE's top 10 holdings account for about 27.16% of its total assets under management.
Performance and Risk
The ETF has added about 12.14% so far this year and was up about 24.07% in the last one year (as of 07/21/2026). In the past 52-week period, it has traded between $33.21 and $42.35
FNDE has a beta of 0.56 and standard deviation of 16.60% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 396 holdings, it effectively diversifies company-specific risk .
Alternatives
Schwab Fundamental Emerging Markets Equity ETF is a reasonable option for investors seeking to outperform the Broad Emerging Market ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Emerging Markets Stock Index Fund ETF Shares (VWO) tracks FTSE Emerging Markets All Cap China A Inclusion Index and the iShares Core MSCI Emerging Markets ETF (IEMG) tracks MSCI Emerging Markets Investable Market Index. Vanguard Emerging Markets Stock Index Fund ETF Shares has $119 billion in assets, iShares Core MSCI Emerging Markets ETF has $149.78 billion. VWO has an expense ratio of 0.06% and IEMG changes 0.09%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Emerging Market ETFs
Bottom Line
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Schwab Fundamental Emerging Markets Equity ETF (FNDE): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).