Vident Financial, a Georgia-based newcomer to the world of ETFs, today launched its first ETF, an international ex-U.S. equities fund that will enter a segment populated by the likes of the $2.2 billion Vanguard Total International Stock Fund (VXUS) and a pair of FlexShares ETFs, to name a few.
To be fair, the Vident International Equity Fund (VIDI) doesn’t seem to be quite like any of its competitors. Tracking a proprietary index, the fund sets out to invest in international equities through a complex methodology that takes into account fundamentals such as debt-to-GDP ratios, valuation as well as risk to determine each company’s—and each country’s—weighting in its risk-weighted portfolio.
At the end of the day, VIDI seeks companies it believes show the best growth prospects based in part on the economic, fiscal and political environment of each country, all in a strategy that’s designed to capture excess long-term returns relative to market-cap-weighted funds. The firm frames its unique approach as “principled investing.”
At launch, the fund has about 27 percent of the portfolio tied to emerging Asia, 25 percent to developed Europe and 10 percent to Latin America, among others. The largest single-country allocation is capped at 5 percent, and the top 10 countries represent just over a third of the portfolio.
VIDI comes to market with one of the highest management fees in the segment—0.75 percent, or $75 per $10,000 invested, a year. Still, as IU’s Senior ETF Specialist Paul Britt pointed out, that cost is competitive compared with what investors would have to shell out for similar exposure in the active management space. By comparison, Vanguard’s VXUS costs just 0.16 percent.
There’s no question that investor appetite for exposure to international equities is strong, particularly since the U.S. Federal Reserve renewed its commitment to keep its easy money policies in place in the U.S., easing concerns globally that capital flows might dry up if the Fed tapered the so-called quantitative easing.