As more think about foreign market exposure to capture more cheaply valued areas and to diversify away from the loftier valuations in U.S. markets, investors should consider an outperforming smart beta or factor-based international exchange traded fund designed to targets quality companies.
Specifically, the VanEck Vectors Morningstar International Moat ETF (NYSEArca: MOTI) has increased 16.9% year-to-date, outpacing the 12.1% gain in the MSCI ACWI ex USA Index and the 7.9% rise in the S&P 500.
Fueling the recent momentum in the MOTI strategy, French aerospace firm Safran SA jumped 10.5% in April. French equities and the broader European equities market, in general, have been supported by a relief rally in light of diminished political concerns after centrist and pro-EU Emmanuel Macron won the French presidential elections.
MOTI includes a 27.5% tilt toward European markets, including France 7.2%, Germany 6.3%, United Kingdom 6.2%, Belgium 3.1%, Sweden 2.2% and Spain 2.1%.
Among sector bets, international real estate investment trusts or REITs, such as Hong Kong property firms like Swire Properties and Cheung Kong Property, and industrial firms were among the top performers in April. MOTI includes a 12.2% tilt toward REITs and 12.3% in industrials.
Compared to the widely observed MSCI ACWI ex USA Index, MOTI is less top heavy when it comes to its sector plays and includes a smaller tilt toward the financial sector. Consequently, MOTI has overweight positions in international sectors like health care, real estate and telecom.
Moreover, MOTI only has a 0.8% position in energy, which can allow it to relatively evade the growing weakness in oil & gas exploration & production companies.