The MSCI ACWI ex-U.S. gauge is up nearly 9% year-to-date. Because of this, investors are understandably interested in revisiting international equities. Many have ignored that asset class for years.
Of course, stock picking is difficult regardless of region, indicating that for many investors, exchange traded funds are appropriate avenues for accessing international markets. Enter the Calvert International Responsible Index ETF (CVIE).
CVIE, which debuted in January, follows the Calvert International Responsible Index and is classified as a large-cap blend fund. That’s a basic methodology. However, it’s relevant when some market observers see opportunity for outperformance by combining investment factors with international equities.
That strategy could prove even more potent when accounting for CVIE’s environmental, social, and governance (ESG) overlay.
International ESG Factor Benefits
As an international blend fund, CVIE features a mix of growth and value stocks. Some of its components meet the parameters of other important investment factors. That could benefit long-term CVIE investors.
“Similar to the US, small size, value, quality, momentum, and minimum volatility in international developed markets have historically outperformed their counterparts. Also similar to the US, the persistence of outperformance has increased the longer the underlying factors have been targeted,” according to BlackRock research.
Again, CVIE isn’t a dedicated factor ETF. However, with the help of the ESG foundation, the Calvert fund has the potential to more readily capitalize on factors such as low volatility and quality. These factors are often hallmarks of stocks with strong ESG traits. That could make CVIE more attractive to a broader investor set over time.
“While these investing concepts have been studied in tens of thousands of papers and confirmed with decades of empirical evidence, it is not surprising that more and more investors have adopted the ability to invest in factor-based strategies in convenient vehicles via the ETF wrapper,” added BlackRock.
Speaking of the quality factor and international ESG advantages, CVIE does not feature any exposure to emerging markets equities. That asset class has many opportunities undervalued relative to domestic stocks. However, emerging markets firms, broadly speaking, aren’t as high-quality as equivalent developed market corporations. Additionally, many companies based in developing economies are in the early stages of emphasizing the importance of ESG. Overall, CVIE offers investors some compelling traits.
“This fund is within the cheapest quintile of its Morningstar Category. Its affordable fee, considered jointly with the fund’s People, Process, and Parent Pillars, suggests that this share class is well-positioned to generate positive alpha versus the lesser of its median category peer or the category benchmark, leading to its Morningstar Medalist Rating of Bronze,” according to Morningstar.
For more news, information, and analysis, visit the Responsible Investing Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.