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5 Top-Rated Global ETF Picks for Q4

Zacks Equity Research

The global markets went berserk in the third quarter with selling pressure hitting the ceiling. Back-to-back issues like the Chinese market crash, slowdown in the Japanese economy, return of deflationary fears in the Euro zone in spite of stimulus measure and slouching commodities bulldozed the market.

Though the situation recovered a little to start Q4, odds remain as evident from the latest growth forecast cut by IMF. The organization slashed the global growth forecast (on October 6) for 2015 to 3.1% from 3.3% projected earlier. Slowing emerging market growth and the commodity market slump were held responsible for this sluggishness. The forecast for 2016 was reduced to 3.6% from 3.8% expected in July (read: 2 Winning Commodity ETFs for the Worst Q3).

As per Reuters, the key industrial economies cut the rates to almost zero and shelled out around $7 trillion in quantitative easing programs in the seven years since the global financial crisis. But this huge influx of funding could not perk up growth, investment and consumer demand as anticipated and instead raised a cautionary flag over global growth (read: Expect Volatility in Q4? Try These ETF Ideas).

Still, the bulls can ride beyond the U.S. border. After all, most of the developed economies are thriving on easy money and thus act as lucrative investment propositions. Even at home, the hyper-active discussion over the Fed lift-off has taken a back seat after somber job data. Now the prospective timeline has shifted to the end of 2015 or early 2016, provided the economy gains momentum.

Though cheap money inflows set the stage for bulls globally, investors need to be selective while playing this field, given the heightened uncertainty.

How to Pick Right ETFs?

First, fundamentals need to be favorable, and then investors can look at our Zacks ETF Rank. This ranking system looks to find the best funds in a given market segment based on a number fundamental and technical factors about them and the Zacks forecast for the underlying industry or asset class.

Following this technique, we at Zacks revised our ETF ranks recently and found out that five global ETFs have been upgraded from #3 (Hold) #2 (Buy). We have also taken diversified exposure into our consideration, given the ongoing volatility in the country-specific exposure, and zeroed in on five global ETFs that are worth considering (see: Our Zacks ETF Rank Guide):


This fund tracks the MSCI ACWI IMI Index. Though the ETF provides exposure to stocks across the developed and emerging markets, U.S. accounts for more than half of the asset base. Apart from this, Japan and UK take the next spots with about 8.1% and 7.3% exposure, respectively.

In total, the fund holds about 800 stocks with each accounting for no more than 1.32% of assets. Financials, IT, Consumer Discretionary, Industrials and Health Care are the top five sectors with double-digit allocation each. The product has managed an asset base of $36.5 million and trades in good volume of more than 6,500 shares a day. It charges 25 bps in annual fees and was up 1.2% in the last one month (see: all the World ETFs here).

JP Morgan Diversified Return Global Equity ETF (JPGE)

The fund seeks to track the FTSE Developed Diversified Factor Index, following the “Smart Beta” strategy, to provide developed market equity exposure. The fund combines the two approaches under a single umbrella – a top down risk allocation framework and a bottom up multi-factor stock ranking process.

The bottom up approach results in selecting stocks based on four factors: value, size, momentum and low volatility, while the top down approach results in an equal-weighted portfolio of stocks selected across 40 different regional sectors.

This approach results in the fund holding a portfolio of 488 stocks from the developed markets with the U.S. taking one-fourth share. The fund charges 38 bps in fees and advanced over 2% in the last one month. This fund also has low risk quotient.   

SPDR MSCI World Quality Mix ETF (QWLD)

The fund looks to track the MSCI World Quality Mix Index to provide exposure to 24 developed economies focusing on matrices like value, low volatility and quality. This $6 million-ETF comprises 1,021 stocks. Sector-wise, Financials, IT, Health Care and Consumers get maximum exposure.

Despite being a global equity ETF, the U.S. dominates the portfolio followed by Japan (8.24%), UK (8.1%) and Switzerland (4.1%). It charges 30 bps in fees for this exposure. The fund nudged up 0.6% in the last one month and has a Medium risk outlook.

FlexShares STOXX Global Broad Infrastructure ETF (NFRA)

This ETF could be appropriate for investors seeking a play on the booming infrastructural activities worldwide. With slow global economic revival, spending on infrastructural activities has been picking up. This was truer in the developing regions rather than developed zones.

Investors should also note that infrastructure is an interest rate sensitive sector, usually with strong yields. With a low rate environment prevalent across the globe, infrastructure looks attractive in the near term (read: 3 Global ETFs for Yield & Growth).

NFRA looks to track the STOXX Global Broad Infrastructure Index. No stock accounts for more than 4.43% of the fund. The ETF presently holds 150 securities with total assets of $414.2 million.

However, investors looking for heavy international exposure might be a little disappointed with this product, as close to half the portfolio is in the U.S. followed by 25% focus in Europe and the rest spread across the Asia-Pacific (15%), Asia (3%), Latin America (2%) and Asia (1%). The fund charges investors 47 basis points and has a yield of 2.40% per year.
NFRA was up 1.3% in the last one month. The fund has a low risk profile.

Workplace Equality ETF (EQLT)

The socially responsible fund looks to track the companies that have ‘progressive workplace policies that treat lesbian, gay, bisexual and transgender (LGBT) individuals equally and respectfully among all employees’.

This produces a portfolio that has about 160 companies in its basket, while it has a slight tilt toward smaller companies, at least when compared to the S&P 500 index. It follows an equal-weight approach, so no single security makes up an outsized portion of the basket.
The fund has double-digit exposure in sectors like consumer discretionary, financials, technology and industrials. EQLT charges 75 bps in fees and was almost flat in the last one month. The product has a low risk outlook.
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