Van Eck Plans Four Non-US ‘Quality’ ETFs

July 26, 2013

Market Vectors plans to offer four ‘quality’ equity funds targeting non-U.S. stocks.

Van Eck Global, the purveyor of the Market Vectors brand of ETFs, filed regulatory paperwork detailing four enhanced-beta ETFs that screen securities in international and emerging markets for “quality”—a term in the investment world that refers to stocks with high returns on equity, stable year-over-year earnings growth and low financial leverage.

The four funds are as follows

  • Market Vectors MSCI Emerging Markets Quality ETF
  • Market Vectors MSCI Emerging markets Quality Dividend ETF
  • Market Vectors MSCI International Quality ETF
  • Market Vectors MSCI International Quality Dividend ETF

 

The “quality” focus is one of the many variations on accessing equities markets that have surfaced in recent years, a reflection of how much more important indexing has become. All the strategies, including the “quality” screen, amount to new ways to cherry-pick particularly attractive pockets of the investment universe, but through a rules-based approach rather than bona fide active management.

One “quality” ETF already on the market is the iShares MSCI USA Quality Factor ETF (NYSEArca: QUAL). To illustrate what sort of exposure to large- and midcap stocks such a strategy can serve up—albeit to U.S. and not international equities—QUAL’s top five holdings are as follows:

  • Exxon Mobil
  • Chevron
  • Apple
  • Google
  • IBM

 

The Market Vectors paperwork detailed neither the tickers nor the proposed expense ratios of the proposed funds.

Targeted Countries

Both of the proposed Market Vectors funds with an emerging markets focus will target 21 countries, while the two with an “international” focus will target 44 countries in both the developed and developing markets.

The emerging market countries being targeted are:

Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, the Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey.

The “international” markets being targeted are:

Australia, Austria, Belgium, Brazil, Canada, Chile, China, Colombia, Czech Republic, Denmark, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Malaysia, Mexico, Morocco, Netherlands, New Zealand, Norway, Peru, the Philippines, Poland, Portugal, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey and the UK.

Dividend Screens

The dividend screens will take that same universe of 21 developing countries and 44 “international” countries and screen for securities that have dividend yields that are at least 30 percent higher than the yields on the parent indexes—the MSCI Emerging Markets Index and the MSCI ACWI ex USA Index, respectively.

Also, only securities with “reasonable payout” and non-negative five-year dividends per-share growth rate are eligible for inclusion in the indexes.

Additionally, securities eligible for inclusion in the indexes include all listed equity securities and, generally, preferred shares as well.

The straight “quality” indexes include real estate investment trusts (“REITs”), while the “quality dividend” indexes will exclude REITs, the filings said.

 

 

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