IndexIQ Brings A New Look To International Equities

The largest international equity exchange traded funds are cap-weighted products, but an increasing number of alternatively-weighted products are catching investors' attention and assets.

The IQ 500 International ETF IQIN is the latest entrant to that fray.

What Happened

IQIN, courtesy of IndexIQ, a unit of New York Life Investments Company, debuted Thursday. IndexIQ's newest ETF tracks the IQ 500 International Index.

“he IQ 500 International Index identifies international companies that enjoy a strong global footprint and, at the same time, are able to maintain their long-term competitive positioning,” according to IndexIQ. “The combination of these factors results in companies that are poised to continue driving improved operational performance and sustainable, long-term equity appreciation with low volatility and turnover.”

Why It's Important

IQIN comes to market at a time when ex-U.S. equities are struggling. Year-to-date, the MSCI EAFE Index is down almost 13 percent while the MSCI Emerging Markets Index is lower by more than 14 percent.

IQIN holds 500 stocks from more than 20 developed markets. Japan, the world's third-largest economy, is by far the new ETF's largest geographic exposure at 30.50 percent. France and Germany, the Eurozone's two biggest economies, combine for over a quarter of IQIN's geographic exposure. Stocks for potential inclusion in IQIN's underlying index are evaluated based on market share, operating margin and sales.

“IQIN takes a different approach, looking at key fundamental factors and weighting the portfolio based on key metrics of relative strength and market position,” said IndexIQ Chief Investment Officer Salvatore Bruno in a statement. “The result is a solution that we believe delivers greater diversification across the international equity markets along with the potential to generate better risk-adjusted returns than traditional international investing approaches.”

The consumer discretionary and industrial sectors combine for over 38 percent of the new ETF's weight while the consumer staples and financial services sectors combine for more than 21 percent.

What's Next

While IQIN is a new ETF, its underlying index has a live track record spanning nearly 11 years. The new ETF's annual expense ratio is 0.25 percent, or $25 on a $10,000 investment.

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