International IPO ETFs such as FPXI offer investors an advantage via the removal of the stock-picking burden. While that may not sound like the most attractive selling point, consider this: Most international IPOs and spin-offs have produced negative returns over the 12-, 24-, 36- and 48-month periods following their IPOs, the best performers have generated returns that have more than offset the losses from the laggards, according to First Trust.
International IPOs are also underrepresented in major global benchmark indices, which could broaden the appeal of FPXI. As of Oct. 2, the IPOX International Index’s constituents combined for just 1.38% of the MSCI ACWI ex-USA Index, according to First Trust data.
FPXI faces competition from the Renaissance International IPO ETF (NYSEArca: IPOS). IPOS, which debuted last month, has traded slightly lower since coming to market though the ETF is up 3.3% since mid-October.
ETF Trends editorial team contributed to this article.