A growing number of multi-factor exchange traded funds offer exposure to international stocks. One of the more seasoned members of that group is the Goldman Sachs ActiveBeta International Equity ETF (NYSEarca: GSIE).
Goldman’s multi-factor ETFs implement multi-factor strategies through its patented ActiveBeta Portfolio Construction Methodology that provides exposure to factors commonly tied to a stock’s outperformance relative to market returns.
Specifically, the factors include value or how attractively a stock is price relative to fundamentals like book value and free cash flow; momentum or the current up or down trend in a company stock; quality or profitability; and low volatility or the degree of fluctuation in a company’s share price over time.
GSIE’s “approach diversifies risk because each of these investment styles tends to work well at a different time. While the fund’s style tilts are modest, it has a low expense ratio to match, which gives it a reasonable chance to beat the market over the long term,” according to Morningstar.
Inside GSIE ETF
GSIE, which turns three in November, holds over 800 stocks. The ETF devotes over 43% of its weight to Europe ex-UK countries. Europe markets and related funds attracted billions of investment dollars following the 2017 French elections as the bloc posted its strongest economic growth in a decade. While earnings have improved across Europe since then, the U.S. has grown at a much faster clip, with the gap in earnings per share between MSCI’s USA and Europe indices expanding to a 30-year high, the Wall Street Journal reports.
Related: Using Investment Factors With Small-Cap ETFs
Japan and the U.K. combine for 37% of GSIE’s weight. Over a third of the fund’s combined weight is allocated to the financial services and consumer discretionary sectors while the consumer staples and industrial sectors combine for over 27%.
“This strategy is off to a good start. From its inception in November 2015 through June 2018, the fund beat the MSCI World ex USA Index by 1.33 percentage points annually, partially thanks to more-favorable stock exposure in the consumer defensive and healthcare sectors,” according to Morningstar.
GSIE earns a Bronze rating from Morningstar. The ETF charges 0.25% per year, or $25 on a $10,000 investment, which is reasonable among smart beta international strategies.
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