International equities have begun to pull ahead of U.S. domestic markets, and one smart beta exchange traded fund strategy that focuses on quality companies trading at an attractive price may be an opportune way to gain access to momentum in foreign equities.
The VanEck Vectors Morningstar International Moat ETF (NYSEArca: MOTI) has increased 13.9% year-to-date, outpacing the 10.6% gain in the MSCI ACWI ex USA Index and the 7.3% rise in the S&P 500.
Supporting the outperformance, MOTI’s large weights in China and Singapore have helped strengthen the portfolio – China makes up 18.0% and Singapore is 11.1% of MOTI’s underlying index.
While many have focused on the U.S. markets with earnings and potential policy changes out of the Trump administration, international equities have begun to outpace domestic equities, and investors are only just beginning to make the shift. For instance, MOTI has only gathered $6.1 million in net inflows year-to-date, according to XTF data.
MOTI tries to reflect the performance of the Morningstar Global ex-US Moat Focus Index. The index includes companies outside the U.S. with sustainable competitive advantages and targets the most undervalued moat stocks, which have helped generate significant excess returns relative to the overall market.