iShares Debuts Two Enhanced International ETFs - ETF News And Commentary
04 March 2014 - 6:00AM
Zacks
San Francisco-based iShares, the market leader in ETFs, is enjoying
dominance in a variety of asset classes, sectors and industries.
Managed by BlackRock Group, the issuer continues to hit the
international market with the launch of two new products that aim
at giving investors new options for factor investing.
The two funds –
iShares Enhanced International Large-Cap
ETF (IEIL) and
iShares Enhanced International
Small-Cap ETF (IEIS) – are actively managed and do not
track the performance of a specified index. Notably, the two
additions have raised the iShares factor ETFs line-up to 12 funds
(read: Buy Quality Stocks with These ETFs).
Both funds seek to provide competitive long-term risk adjusted
returns relative to broad indexes for their respective cap levels.
This is likely to be done by focusing on three important factors;
quality (consistent and stable earnings), value (lower relative
valuations), and size (firms with lower relative market cap
levels).
IEIL: Large Cap ETF in Focus
This ETF looks to provide exposure to the international developed
equity markets with a focus on large cap stocks. Holdings 172
stocks in its basket, the product is widely spread across each
security as none of these holds more than 2.11%. The fund charges
35 in annual fees.
From a sector look, the fund is slightly tilted toward financials
which account for 24%, closely followed by energy (14.79%) and
industrials (11.65%). Further, Japan, United Kingdom, Germany,
Canada and Switzerland all make up for double-digit exposure in the
portfolio.
IEIS: Small Cap ETF in Focus
This fund looks to target the small cap segment of the
international developed equity markets and holds 389 stocks in its
basket. The ETF is well spread out across each sector and security
as each security holds less than 2.08% of the assets (read: 3
Foreign Small Cap ETFs Likely to Outperform).
Sectors like financials, industrials, consumer discretionary,
information technology and energy make up for double-digit exposure
while others have modest allocations. With respect to country
holdings, Japanese stocks dominate the fund’s profile at nearly 24%
while United Kingdom (16.29%) and Canada (7.75%) round off to the
next two spots. The ETF charges a slightly higher fee of 49 bps per
year from investors.
How do they fit in a portfolio?
The new products appear to be interesting choices for investors
seeking diversified exposure to the developed economies, excluding
U.S., due to their unique features and approach (see: all the Broad
Developed World ETFs here).
Factor investing could prove beneficial for investors given their
superior risk adjusted returns relative to broad traditional
counterparts amid the recent volatility across the developed world.
The strategy has been gaining immense popularity in recent years as
this seeks to outperform the market over the long term.
This is especially true as the new funds are widely spread across
number of countries, sectors, and securities. Smaller allocations
could keep the portfolio balanced among various components and
prevent heavy concentration.
Competition
These two have little in terms of competition as of now, as the
international-focused actively managed market is sparse. However,
this could change if iShares can see a good deal of interest in
these innovative products, potentially acting as a huge catalyst
for opening up international stocks for active management in ETF
form.
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