Expanding on its line of multifactor exchange traded fund strategies, John Hancock launched its first international ETF, allowing investors diversify into global markets through a smart beta indexing approach.
On Friday, John Hancock rolled out the John Hancock Multifactor Developed International ETF (NYSEArca: JHMD). JHMD has a 0.45% net expense ratio.
“Adding an ETF focused on international investing is a logical extension of our product line, and we are pleased to be able to bring Dimensional’s proven multifactor approach to investors seeking to invest in international markets,” Andrew G. Arnott, president and CEO of John Hancock Investments, said in a note.
The Multifactor Developed International ETF tries to reflect the performance of the John Hancock Dimensional Developed International Index, which is comprised of developed market companies outside the U.S. and Canada. The underlying index also implements a rules-based screening or multifactor screening process that small-caps, lower relative price and higher profitability, which academic research has linked to higher expected returns.
Specifically, the small-cap premium corresponds to the outperformance of small-caps over large-caps. The companies that trade at lower relative price or a value premium relates to value stocks over growth stocks. Lastly, the profitability premium shows that highly profitable companies tend to do better than less profitable companies.
According to Dimensional Fund Advisors, when combined, the various factors may help improve a portfolios risk-adjusted returns over time. The multifactor strategies select securities of a specific sector with a desired market capitalization range, with an increase emphasis on higher expected return securities. The securities will exhibit lower relative price, higher profitability and lower market capitalization. Moreover, securities’ weights are capped to diminish concentration.
“The beauty of Dimensional’s philosophy is that it is straightforward and disciplined in its approach, yet so thoughtful and innovative in its implementation. They are truly an exceptional firm to be able to partner with to deliver solutions to our clients,” Steve L. Deroian, head of ETF strategy at John Hancock Investments, said in a note.
JHMD’s sector weights include financials 18.4%, industrials 15.6%, consumer discretionary 15.3%, materials 10.5%, health care 7.8%, consumer staples 7.7%, telecom services 5.6%, utilities 4.6% energy 4.4% and information technology 4.2%
Top holdings include Toyota 2.0%, ABB LTD 1.2%, Novartis AG 1.0%, Basf SE 1.0% and HSBC Holdings 1.0%.
For more information on new fund products, visit our new ETFs category.