Financial advisors continue to favor mutual funds for their international exposure, with 70% investing in traditional fund products while 58% use ETFs and 38% using a combination of both for international exposure.
ETF investors interested in international exposure have a number of options available. Northern Trust’s FlexShares includes a number of smart beta or alternative index-based ETF strategies that focus on international markets. For example, the FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (NYSEArca: TLTD) stands as a worthy alternative to the typical EAFE-based ETF. The fund features a legitimate “tilt” and it is toward smaller-cap and value stocks using a multi-factor modeling approach that attempts to enhance portfolio risk/return characteristics.
Additionally, the FlexShares International Quality Dividend Index Fund (NYSEArca: IQDF) takes a quality approach to ex-US dividend payouts. IQDF screens for management efficiency, profitability and cash flow. Each company has to show management efficiency, or firms that efficiently deploy capital and make smart financing decisions. Companies with wider profit margins are better positions to grow and maintain dividends than those with slimmer margins. Additionally, firms that can meet debt obligations and day-to-day liquidity needs are better capable of maintaining dividends.
For more information on the ETF industry, visit our current affairs category.