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Davis Advisors Launches International Equity ETF

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Davis Advisors launched a new fund on Mar 2, 2018, focused on providing exposure to the multi-cap space of the global equity market.

Davis Select International ETF DINT tracks the MSCI ACWI ex-U.S. Index and provides exposure to both emerging and developed ex-U.S. markets.

Fund Characteristics

The fund’s index seeks to provide investment results that closely track the performance of outperforming international companies with a target of long-term growth in capital. The MSCI ACWI ex-U.S. Index measures the performance of stocks from the developed as well as emerging countries, excluding the United States. It has amassed AUM of $5.1 million within a few days of trading and has a high expense ratio of 75 basis points a year.

From a sector look, Consumer Discretionary, Industrials and Information Technology are the top three allocations of the fund, with 23.8%, 18.4% and 16.8% exposure, respectively. From a top holdings perspective, the fund has 7.0% exposure to Naspers Ltd, 6.6% to Alibaba Group Holding Ltd and 6.2% to Hollysys Automation Technologies Ltd. However, given the fund’s 49.3% exposure to emerging markets, it should be noted that investing in emerging market stocks requires a steady appetite for risk, as they are more volatile than their developed world counterparts.

How Does it Fit in a Portfolio?

The U.S. market recently saw a selloff on fears of rising interest rates. The S&P 500 entered correction territory, as it declined more than 10% from the record high set in January.

However, inflation fears have subsided with recent economic data playing a role in reducing fears of aggressive rate hikes. Consumer prices increased 2.2% year over year in February, up from 2.1% reported in the previous month. As a result, muted inflation numbers led to a decline in the greenback and in the expectations of aggressive rate hikes by the Fed.

Emerging markets might gain in case the Fed goes slow on rate hikes, as these investments fall out of favor when the Fed speeds up policy tightening. This is primarily because a reduction in the interest rate differential between the United States and emerging markets reduces the attractiveness of the latter. Moreover, international funds offer high diversification benefits to traditional portfolios.

Competition

The fund faces intense competition. Below we discuss a few ETFs that seek to provide exposure to ex-U.S. ETFs (see  all World ETFs here ).

SPDR MSCI ACWI ex-US ETF CWI    

This fund provides exposure to equities from developed and emerging markets outside the United States.

It has AUM of $1.6 billion and charges a fee of 30 basis points a year. From a geographical perspective, Japan, U.K. and China are the top three allocations of the fund, with 16.6%, 11.6% and 7.9% exposure, respectively. Financials, Industrials and Information Technology are the top allocations of the fund, with 23.8%, 12.3% and 11.5% exposure, respectively. From a top holdings perspective, the fund has 1.6% exposure to Tencent Holdings, 1.2% to Nestle S.A. and 1.1% to Samsung Electronics Co. Ltd. It has returned 20.1% in a year. It has a Zacks ETF Rank #3 (Hold) with a Low risk outlook.

iShares MSCI ACWI ex U.S. ETF ACWX

This fund provides exposure to equities from developed and emerging markets outside the United States.

It has AUM of $3.2 billion and charges a fee of 32 basis points a year. From a geographical perspective, Japan, UK and China are the top three allocations of the fund, with 16.5%, 11.5% and 7.9% exposure, respectively. Financials, Information Technology and Industrials are the top allocations of the fund, with 23.2%, 12.0% and 11.6% exposure, respectively. From a top holdings perspective, the fund has 1.5% exposure to Tencent Holdings, 1.1% to Nestle S.A. and 1.0% to Samsung Electronics Co. Ltd. The fund has returned 20.5% in a year. It has a Zacks ETF Rank #3 with a Medium risk outlook.

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all World ETFs here


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SPDR-MSCI ACWI (CWI): ETF Research Reports
 
ISHRS-MSCI ACWX (ACWX): ETF Research Reports
 
DAVIS-SEL INTL (DINT): ETF Research Reports
 
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