Investors can also look to smart beta strategies that incorporate fundamental factors in their indexing methodologies to limit the potential risks of a traditional market cap-weighted fund. The JPMorgan Diversified Return International Equity ETF (NYSEArca: JPIN) is a multi-factor ETF that provides advisors and investors direct access to hedge fund exposure inside an ETF vehicle. The underlying indices diversify risks that are less likely to be rewarded while overweighting areas that are more likely to produce positive results.
The underlying customized FTSE Russell indexing methodology selects components based on a diversified set of factor characteristics, such as relative valuation, price momentum and quality. The enhanced indexing process would allow the ETFs to exclude expensive, low quality companies with poor momentum, which could help the ETFs diminish drawdowns without sacrificing too much from any potential upside of a market recovery.
Additionally, investors may also look to a time-tested active approach to potentially enhance returns. Davis Advisors recently rolled out the actively managed Davis Select International ETF (NasdaqGM: DINT) after its successful launch of the Davis Select Worldwide ETF (NasdaqGM: DWLD). The newer Davis Select International ETF seeks to generate long-term growth of capital by investing in common stocks issued by foreign developed and emerging market companies, whereas DWLD covers world markets, including the U.S.
Davis Advisors focuses on long-term opportunities that incorporate the money manager’s judgement experience, high conviction, low turnover, accountability and alignment. The Davis team screens for fundamental characteristics, including cash flows assets and liabilities, and other criteria.