For Salvatore Bruno, Chief Investment Officer of IndexIQ, market cap weighted indices, although popular, are simplistic, and can deliver a significant drag on a portfolio when a fund’s constituents suffer from price deviation from their fundamental value.
That’s why IndexIQ, a New York Life Investments Company, today announced the launch of the IQ 500 International ETF (NYSEArca: IQIN).
IQIN tracks the performance, before fees and expenses, of the IQ 500 International Index, which was developed by IndexIQ and has a live track record dating from 12/31/07. All index components are headquartered outside the U.S. and are made up of common stock, not ADRs. The potential universe of constituent equities is ranked and weighted according to three fundamental factors; Sales, Market Share and Operating Margin.
Bruno told ETF Trends that the fund was a return to IndexIQ’s roots.
“We already have HFXI, which is our international 50 percent currency hedged ETF and that’s really straightforward market capitalization from the security standpoint,” he said. “The innovation there is a 50 percent currency hedge. We wanted to bring out a solution that goes a little bit beyond the market cap weighted and especially try to pick up some excess return while still maintaining exposure to large companies globally.”
Bruno said IQIN takes a different approach, looking at key fundamental factors and weighting the portfolio based on key metrics of relative strength and market position.
“The result is a solution that we believe delivers greater diversification across the international equity markets along with the potential to generate better risk-adjusted returns than traditional international investing approaches,” Bruno said.