One of the hottest themes in the ETFs space this year has been investors favoring ex-US developed markets in search of value opportunities. In fact, some of the top asset-gathering ETFs this year are funds tracking stocks in developed markets outside the U.S.
Ex-US developed market equity exchange traded funds have been favored destinations for investors this year. Some smart beta ETFs offering investors new ways to view developed market stocks. That includes the Oppenheimer International Revenue ETF (NYSEArca: REFA), which debuted in July.
REFA looks to outperform the widely followed MSCI EAFE Index. Weighting stocks by revenue, as REFA does, can provide advantages for investors.
“By weighting companies by their revenue rather than their market capitalization, the fund aims to provide investors with increased exposure to the stocks of companies across the developed markets with strong revenues. This approach also avoids the traditional index’s bias towards overvalued stocks, while maintaining a fully transparent investment process and offering the broad market diversification that has historically attracted investors to index strategies,” according to Oppenheimer.
Revenue weighting could provide diversified exposure to the market, is not influenced by stock price, reflects a truer indication of a company’s value and offers stable sector exposure. Moreover, revenue weighting may provide a more value-oriented portfolio and historically outperformed in a value-driven market while showing lower drawdowns during growth-driven markets.