On the upcoming webcast, Why Smart-Beta Works for International Markets Too, Steve Deroian, Head of ETF Strategy at John Hancock Investments, Matthew Miskin, Senior Capital Markets Research Analyst at John Hancock Investments, and Joe Hohn, Portfolio Manager at Dimensional Fund Advisors, will go over international market opportunities and risks, along with alternative or smart beta index-based strategies to better capture returns.
For example, the John Hancock Multifactor Developed International ETF (NYSEArca: JHMD), tries to reflect the performance of the John Hancock Dimensional Developed International Index. The underlying index is comprised of developed market companies outside the U.S. and Canada, and it also implements a rules-based screening or multifactor screening process that singles out small-caps, lower relative price and higher profitability, which academic research has linked to higher expected returns.
The small-cap premium corresponds to the outperformance of small-caps over large-caps. The companies that trade at lower relative price or a value premium relates to value stocks over growth stocks. Lastly, the profitability premium shows that highly profitable companies tend to do better than less profitable companies.
The multifactor strategies select securities of a specific sector with a desired market capitalization range, with an increase emphasis on higher expected return securities. The securities will exhibit lower relative price, higher profitability and lower market capitalization. Moreover, securities’ weights are capped to diminish concentration.
When combined, the various factors may help diminish risk while providing exposure to any potential upside, or improve a portfolio’s risk-adjusted returns over time.
JHMD’s sector weights include financials 18.8%, industrials 16.2%, consumer discretionary 15.5%, materials 10.6%, health care 8.2%, consumer staples 8.2%, telecom services 5.7%, utilities 4.7% energy 4.5% and information technology 4.2%. Top holdings include Toyota 1.8%, ABB LTD 1.2%, Novartis AG 1.0%, Basf SE 1.0% and Nestle SA 1.0%.
Country exposures include Japan 25.3%, United Kingdom 18.3%, Germany 9.4%, France 9.1%, Switzerland 8.4%, Australia 7.1%, Hong Kong 3.5%, Spain 3.1, Netherlands 3.1% and Sweden 2.8%.
Financial advisors who are interested in learning more about international market risks and opportunities can register for the Tuesday, January 10 webcast here.