The Market Vectors Morningstar International Moat ETF (NYSEArca: MOTI) can help investors diversify into international markets and potentially provide more attractive returns.
MOTI may act as a strong core position as investors seek greater overseas exposure.
On the recent webcast, Improve International Stock Selection, Dan Lefkovitz, Content Strategist for Indexes at Morningstar, pointed out that investors have been slowly shifting out of U.S. stocks and taxable bonds while putting more money into international equities. Looking at the rolling 12-month flows in open-end and ETF categories, international equity funds are attracting over $200 billion, whereas U.S. equity fund flows look slightly negative and taxable bond fund funds came in about $50 billion, according to Morningstar data.
Many investors may have a home bias, solely allocating toward U.S. stocks. However, Lefkovitz also noted that the world stock market is more than the U.S. The developed world stock market capitalization, as of the end of 2014, stood at about 58.4% U.S. and 41.6% foreign markets, so a diversified international investment portfolio would include about 40% foreign assets when considering total market-cap exposure.
Brandon Rakszawski, Product Manager at Van Eck Global, explains that MOTI, like the popular U.S.-focused Market Vectors Morningstar Wide Moat ETF (NYSEArca: MOAT), tracks a proprietary Morningstar wide moat, smart-beta strategy in selecting international components. [Wide Moat ETF Gets an International Counterpart]
“The Morningstar’s moat philosophy aims to identify companies with structural competitive advantages that are more likely to earn above-average returns on capital over a long period of time,” Rakszawski said.