A Boss Among New ETFs

As has been the case in years past, 2016 has seen hundreds of new exchange-traded funds come to market. And as in previous years, many new ETFs are struggling to garner investors' assets.

That does not mean all new ETFs are destined for failure. Sometimes it takes a while for a new ETF's concept to come into style or for investors to unearth the value in rookie ETFs. Still, new ETFs face an increasingly competitive landscape, one that makes identifying the winners in terms of assets gathered among this year's infant ETFs easier.

A scant amount of this year's new ETFs have reached the much ballyhooed $100 million in assets under management mark. An even smaller amount have topped $200 million. One rookie ETF that dwells in the latter category is the Vanguard International Dividend Appreciation ETF VIGI.

Giving VIGI A Second Look

VIGI debuted in March alongside the Vanguard International High Dividend Yield ETF VYMI, marking the only two new ETFs launched by Pennsylvania-based Vanguard this year.

VIGI “emphasizes stocks exhibiting dividend growth and seeks to track the Nasdaq International Dividend Achievers Select Index, which comprises more than 200 all-cap developed and emerging markets stocks with a track record of increasing annual dividend payments,” according to Vanguard.

At the end of November, VIGI had $230.5 million in assets under management, easily making it one of this year's most successful new ETFs and putting it among just a handful of rookie ETFs to attract more than $200 million in assets.

Comparing VIGI To VIG

VIGI had some advantages when it came to market, not the least of which is the ETF is the international equivalent of the Vanguard Dividend Appreciation ETF VIG, the largest U.S. dividend ETF.

“As is the case with VIG, the fund's underlying index--the Nasdaq International Dividend Achievers Select Index--looks to home in on stocks that have a long history of paying and growing their dividends. As is also the case with VIG's index, the methodology document for this fund's bogy is lacking detail. What we know for sure is that in both cases, the result of the process defined by the indexes' guiding principles is a portfolio of high-quality stocks,” said Morningstar in a recent note.

VIGI, which blends developed markets exposure with a nearly 23 percent allocation to emerging markets dividend payers, has other positives.

“As of the end of October, the stocks in VIGI's portfolio had an average return on invested capital of 13.62 percent, versus 10.44 percent for the average fund in its category. Additionally, 80.2 percent of VIGI's portfolio was invested in stocks that our analysts deem to have wide or narrow Morningstar Economic Moat Ratings, versus 69.6 percent for its average peer. Economic moats are evidence of a high-quality firm with sustainable competitive advantages,” noted Morningstar.