As many look to international markets to expand their portfolios, investors will have to consider the risks. Alternatively, look to a multi-factor smart-beta exchange traded fund strategy that could potentially enhance returns and diversify away from the risks.
On the upcoming webcast, A Better Way to Access International Markets, Samantha Azzarello, Vice President and Global Market Strategist at J.P. Morgan Asset Management, Yasmin Dahya, Vice President of ETF Product Development at J.P. Morgan Asset Management, and Chris Shuba, Founder of Helios Quantitative Research, will outline international market opportunities and a risk-weighted, multi-factor approach to enhance returns while limiting potential drawdowns.
For example, the JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN) can help investors as a a way to capitalize on the ongoing quantitative easing in Europe and Japan, lower relative valuations to domestic equities and ongoing economic recovery. The ETF’s multi-factor indexing methodology can capture more upside while still protecting against potential downsides through risk weighting and the volatility factor.
Specifically, the underlying index diversify risks that are less likely to be rewarded while overweighting areas that are more likely to be rewarded. The underlying customized FTSE Russell index selects components based on a diversified set of factor characteristics, such as relative valuation, price momentum and quality. The enhanced indexing process would allow the ETFs to exclude expensive, low quality companies with poor momentum, which could help the ETFs diminish drawdowns without sacrificing too much from any potential upside of a market recovery.
Top country weights include Japan 25.6%, U.K. 20.8%, Korea 10.2%, Australia 9.1% and Hong Kong 5.6%.
The smart beta international ETF includes a relatively spread out sector allocation, including consumer discretionary 11.2%, consumer staples 12.5%, energy 8.1%, financials 8.8%, health care 11.1%, industrials 11.4%, information technology 8.6%, materials 8.9%, telecom services 8.6% and utilities 10.2%. In contrast, other cap-weighted index strategies are overweight financials and technology.
Top holdings include prominent international names like British American Tobacco 0.8%, Royal Dutch Shell 0.7%, BP PLC 0.7%, Samsung Electronics 0.7% and GlaxoSmithKline 0.7%.
Financial advisors who are interested in learning more about international market investments can register for the Tuesday, January 31 webcast here.