An International Model Portfolio to Bypass Mere Stock- and ETF-Picking

Many market observers are forecasting big things for international stocks this year, including developed markets fare.

The WisdomTree Developed International Multi-Factor Model Portfolio offers advisors an effective way to position client portfolios for more upside in international developed markets.

“This model portfolio is designed for investors with a long-term horizon looking for exposure to a broad universe of Developed International equities primarily using factor focused ETFs,” according to WisdomTree. “The selected ETFs provide certain factor tilts that have the potential to generate excess return relative to comparable cap-weighted benchmarks over longer-term holding periods. The strategies may use both WisdomTree and non-WisdomTree ETFs.”

This model portfolio is relevant at a time when developed market stocks are showing signs of life for the first time in what feels like an eternity.

“The momentum is a fresh start after a dismal decade of international equity performance versus U.S. markets. Only twice over the past 10 calendar years has the MSCI EAFE Index outperformed the S&P 500 (2012 and 2017), and both times were by slim margins,” writes WisdomTree senior analyst Bryan Manby.

A Great Time for International Investments and 2 WisdomTree ETFs

Getting international exposure is a great way to pull in uncorrelated market movements. But at a time when a pandemic has the whole world in its grasp, it becomes quite the challenge. Fortunately, smart beta multi-factor strategies used in ETFs featured in WisdomTree’s model portfolio can rise to the challenge.

Many ex-US markets are considered value destinations. The WisdomTree portfolio offers quality/value tilts with several of its components holdings.

The WisdomTree International Quality Dividend Growth Fund (CBOE: IQDG) and the WisdomTree International Hedged Quality Dividend Growth Fund (NYSEArca: IHDG) represent two quality avenues for advisors seeking ex-US developed markets exposure.

IHDG 1 Year Performance

The ETFs’ underlying indexes “employ the same strategy, which results in exposure to companies with strong earnings, healthy balance sheets and low leverage. They select the top 300 companies from the dividend-paying, international equity universe, ranked by a combination of dividend growth and quality factors. The only difference is that the former Index employs a currency-hedged strategy to mitigate fluctuations in foreign exchange, while the latter does not,” says Manby.

IQDG is the second-largest component in WisdomTree’s Developed International Model Portfolio.

IQDG 1 Year Performance

For more on how to implement model portfolios, visit our Model Portfolio 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.