New indicators are flashing that European central bankers are gearing up for rate cuts this summer.
The New York Times reported that during a number of recent meetings in Washington, European policymakers expressed optimism that inflation concerns have eased in the area. The Times noted that the European Central Bank had previously implied that rate cuts for the area could begin in June.
While Europe’s moves are certainly not set in stone, investors could use this opportunity to pivot to European ETFs that may benefit from rate cuts. One such fund is the ALPS O’Shares Europe Quality Dividend ETF (OEUR).
OEUR primarily seeks to invest in large and mid-cap European companies that provide dividends. The fund has a net expense ratio of 0.48% and is benchmarked to the O’Shares Europe Quality Dividend Index.
Factor Screening
Components of the index are selected from the S-Network Europe Equity 500 Index. The selection process utilizes a multi-factor methodology to screen companies based on quality, low volatility, dividend yield, and dividend quality. By prioritizing such factors, the index’s components are well-positioned to offer investors benefits after interest rate cuts occur.
In order to track the index’s performance, the fund can either apply a representative sampling strategy or replication strategy. This flexibility with allows the fund to better adapt and position itself for potential profit.
Though the majority of focus will be placed within the index’s constituents, OEUR may allocate up to 20% of assets into investments outside of the index. This adds to the fund’s overall flexibility, allowing ALPS to offer access to other potentially beneficial investments.
The fund has an established presence in providing annual returns. Over the last 12 months, OEUR’s NAV is up 16.19%, as of March 31st, 2024. Per FactSet, the fund has seen net flows of about $1.4 million over the last month. The flows contribute to OEUR’s total of over $38 million in assets under management.
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