A smart beta exchange traded fund, the iShares Edge MSCI Multifactor Intl ETF (INTF - Free Report) debuted on 04/28/2015, and offers broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $783.62 million, which makes it one of the larger ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, seeks to match the performance of the MSCI World ex USA Diversified Multi-Factor Index.
The MSCI World ex USA Diversified Multi-Factor Index is designed to select equity securities from MSCI World ex USA Index that have high exposure to four investment style factors: value, quality, momentum and low size, while maintaining a level of risk similar to that of the Parent Index.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for INTF are 0.30%, which makes it on par with most peer products in the space.
INTF's 12-month trailing dividend yield is 4.83%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Looking at individual holdings, Roche Holding Par Ag (ROG - Free Report) accounts for about 4.78% of total assets, followed by Woolworths Group Ltd (WOW - Free Report) and Rio Tinto Plc (RIO - Free Report) .
Its top 10 holdings account for approximately 25.19% of INTF's total assets under management.
Performance and Risk
Year-to-date, the iShares Edge MSCI Multifactor Intl ETF has lost about -24.36% so far, and is down about -18.54% over the last 12 months (as of 03/31/2020). INTF has traded between $17.43 and $27.44 in this past 52-week period.
The fund has a beta of 0.91 and standard deviation of 18.90% for the trailing three-year period, which makes INTF a medium risk choice in this particular space. With about 222 holdings, it effectively diversifies company-specific risk.
IShares Edge MSCI Multifactor Intl ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard FTSE All-World ex-US ETF (VEU - Free Report) tracks FTSE All-World ex US Index and the Vanguard FTSE Developed Markets ETF (VEA - Free Report) tracks FTSE Developed All Cap ex US Index. Vanguard FTSE All-World ex-US ETF has $20.38 billion in assets, Vanguard FTSE Developed Markets ETF has $62.56 billion. VEU has an expense ratio of 0.08% and VEA charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.