iShares, the San Francisco-based exchange-traded fund issuing arm of BlackRock, recently launched two international factor-based ETFs to expand its lineup of the so-called smart-beta funds. Many analysts, however, believe that latest launches were an attempt by the world’s biggest ETF issuer to match the wide-range of multi-factor fund offerings by rival provider State Street Global Advisors.
To be sure, the timing of the launch is also important, particularly when the European Central Bank is scheduled to launch its own version of an open-ended Quantitative Easing as of Monday.
Both the passively-managed funds – the iShares MSCI International Developed Momentum Factor ETF (IMTM) and the iShares MSCI International Quality Factor ETF (IQLT), seek opportunities in developed markets outside the US and, like their US-focused earlier avatars MTUM and QUAL, both the new ETFs seeks to tap returns generally not available with traditional capitalization-weighted funds.
IMTM tracks the MSCI World ex-USA Momentum Index and seeks to replicate the performance of large and mid–cap international stocks from 15 developed EAFE countries exhibiting higher price momentum.
The portfolio holds 266 securities in its basket with Japan getting the maximum exposure (30.42 percent), followed by Canada (17.8 percent), Switzerland (12 percent), UK (8.67 percent) and Germany (4.63 percent).
The fund is well-diversified with little concentration risk as no single stock accounts for more than 5.05 percent. Though the fund is tilted toward the defensive healthcare sector (27.74 percent), it has adequate exposure in higher-beta sectors such as financials (17.92 percent), industrials (and consumer discretionary (10.78 percent).
IMTM charges 0.3 percent per annum.
IQLT, on the other hand, follows the MSCI World ex-USA Sector Neutral Quality Index and the components for the index are drawn from the top 85 percent of the market capitalization of developed foreign markets exhibiting positive fundamentals such as high ROE (return on equity), low financial leverage and stable earnings growth. IQLT holds 286 large and mid–cap developed international stocks in its basket.
The fund’s top three sectors include financials (26.90 percent), consumer discretionary (12.47 percent) and industrials (12.29 percent) while consumer staples (10.69 percent) and health-care (10.27) round out the top five for this well-diversified ETF.
IQLT also has an annual expense ratio of 0.3 percent.
Disclosure: No holdings