Last year, investors flocked to international equity exchange traded funds, a theme that is expected to continue in 2018 as market participants look for value avenues beyond the U.S. Some international smart beta funds have the potential to offer significant 2018 upside, including the iShares Edge MSCI Multifactor Intl ETF (NYSEArca: INTF).

Through a multi-factored approach, INTF attempts to deliver enhanced returns and maximize diversification in an attempt to provide potentially improved risk-adjusted returns, compared to traditional market-capitalization-weighted indices.

“It’s different than the typical global ETF in that it’s a smart-beta option, which means it targets stocks with specific characteristics. In this case, that’s developed nation companies in the mid-cap and large-cap markets with relatively low valuations (AXA, with a $65 billion market cap, is its largest holding) and strong price momentum,” reports CNBC.

Specifically, some argue that cap-weighted indices may put an investor at risk of chasing a rally since the best performing stocks would gain the most assets and typically have the largest weight in an index.

INTF “seeks to track the investment results of an index composed of global developed market large- and mid-capitalization stocks, excluding the U.S., that have favorable exposure to target style factors subject to constraints,” according to iShares.

“The stocks are also selected based on the quality of being fiscally disciplined companies with a record of rewarding shareholders through dividends. Or to put it in technical terms, quality is based on return on equity (higher is better), debt/equity (lower is better) and earnings growth variability (lower is better),” according to CNBC.

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