Remember This International ETF

Investors are flocking to ex-U.S. equity exchange-traded funds this year. The enthusiasm for stocks outside the U.S. is spread around to developed and emerging markets, with ETF investors largely preferring low-cost funds.

Not surprisingly, many of the least expensive international ETFs are also among the largest funds in this category, prompting some pricier though still products to become overlooked. Such is life for the Vident International Equity ETF VIDI, but this is an ETF that arguably deserves more attention from the investment community.

The Vident International Equity etf is neither new nor small. VIDI is nearly four years old and has $727.2 million in assets under management, according to issuer data. Those are superficial metrics. What really matters is that VIDI is up 27 percent year-to-date compared to a gain of 20 percent for the MSCI ACWI ex-U.S. Index.

VIDI Details

VIDI follows the Vident Core International Equity Index, which features exposure to developed and emerging markets, but this ETF is about much more than simple geographic positioning.

Member firms in VIDI's need to meet qualifications, such as “Stronger fiscal conditions, More sound monetary policies, More favorable business and legal environment, Higher productivity, More productive demographics, Broader and deeper markets, Cheaper country and company valuations, Better leadership and governance, and More global diversification,” according to Vident.

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“One company that has made an impression with its three ETFs that we have covered in this space before is Vident Financial,” said Street One Financial vice president Paul Weisbruch in a note out Thursday. “Year-to-date, the 4-star Morningstar rated VIDI has reeled in an additional $25 million in new assets.” 

More Developed Markets

VIDI's geographic weights tilt more ex-US developed markets as the ETF allocates about a third of its weight to developed Europe stocks and another 27 percent to Asia-Pacific. Emerging Asia stocks account for over 23 percent of VIDI's 262 holdings.

VIDI's underlying index features nearly triple the exposure to mid-cap stocks that the MSCI All-Country World Index features. That could be one reason VIDI has outperformed rival international benchmarks this year.

VIDI charges 0.68 percent per year, or $68 on a $10,000 investment. That is pricier than cap-weighted international ETFs, but VIDI's out-performance of some rival funds this year makes its expense ratio tolerable.

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