Northern Trust's second attempt at the ETF game is turning out
to be a whole lot better than the first. The firm, under its
FlexShares brand name, has seen a huge level of interest in many
of its products, allowing the company to accumulate nearly $4.7
billion in total assets.
This is despite having one of the smaller lineups of
, suggesting that a few of the funds have been big winners. This
has especially been the case for its commodity focused ETF
, and a short-term TIPS ETF,
, both of which have more than one billion in total assets.
Thanks in part to this success, FlexShares has been more
active on the product development front, putting out a few new
ETFs over the past year. This trend looks to continue in Q2 as
the firm has just launched three new international products that
focus in on dividends (see
3 Red Hot Dividend ETFs
This continues the broad trend in the market towards higher
income securities, a situation that has become important thanks
to the Fed's low rate policies. With this backdrop, many
investors have begun to look to stocks for income, and
international ETFs have taken a good chunk of this attention.
The space is now a bit more crowded thanks to FlexShares' new
ETFs. This is especially true given the use of Northern Trust's
Dividend Quality Score (DQS) in all three of the new
This proprietary quantitative method uses fundamental data to
assess the strength and quality of a firm's dividend-paying
record and its prospects going forward. The process is based on
three main factors; management efficiency and dividend policy,
profitability, and cash flow to sustain dividend payments (read
4 Excellent Dividend ETFs for Income and
A focus on yield while utilizing this process could be of
interest to investors seeking companies that have a great chance
to keep paying out strong yields over long time periods. Given
this, the new FlexShares funds could be of interest to those
seeking plays beyond the U.S. market, and we have highlighted
some of the other key points about the trio below:
International Quality Dividend Defensive Index Fund (
This ETF looks to track the Northern Trust International
Quality Dividend Dynamic Index, charging investors 47 basis
points a year in fees. The benchmark seeks to provide exposure to
long-term growth stocks in the broad international environment
with a focus on yield, using the DQS system.
Additionally, the benchmark will focus on lower beta stocks in
order to be more defensive in turbulent times. The target calls
for a beta between 0.5 and 1.0 times the Northern Trust
International Large Cap Index, so there could be a wide range for
this fund's riskiness level.
The fund looks to be heavily exposed to European markets, with
the UK and France in the top five. The exposure looks to be quite
diverse overall though, as Japan, Canada, and Australia are also
in the top tier (also see
Are There Really High Dividend Low Risk ETFs?
In terms of sectors, financials account for 28% of assets, a
huge percentage compared to other segments. Energy, health care,
and telecoms, are the next three biggest, and they combine to
account for roughly 30% of the fund.
International Quality Dividend Dynamic Index Fund (
IQDY seeks to follow the Northern Trust International Quality
Dividend Dynamic Index, charging 47 basis points for this
exposure. This product also looks to utilize the DQS system,
focusing on ex-US markets for long-term growth potential and
This ETF looks to be a bit riskier than its counterpart
though, as the beta target will be higher than the parent's
index. So, IQDY intends to have a beta between 1.0 and 1.5 times
the Northern Trust International Large Cap Index, while still
having a higher income level.
Country exposure is once again tilted towards the UK with this
nation accounting for 17.8% of the total. Rounding out the rest
of the top five is Japan (11.2%), Australia (8.4%), Germany
(7.7%), and China (6.8%).
Sector allocations are focused in on financials, with this
sector making up 28.3% of the total. The rest of the top four is
a bit different than IQDE though, with industrials, energy, and
materials taking up the spots (see
Emerging Market Dividend ETFs in Focus
International Quality Dividend Index Fund (
This fund looks to track the International Quality Dividend
Index, charging investors 47 basis points a year in fees. IQDF
looks to be the middle of the road option in terms of beta,
seeking to match the beta levels of the parent index.
The parent is once again the Northern Trust International
Large Cap Index, so stocks look to be from both developed and
international markets. Additionally, the income from IQDF looks
to be higher than the parent index, making it a potential income
Financials are once again the biggest sector, at just over 28%
of assets. This is trailed by energy and industrials, while the
two consumer sectors round out the top five.
In terms of nations, British stocks make up roughly 14.6% of
assets, followed by Japan and Australia. France and Canada round
out the top five, although these make up, respectively, 8.7% and
5.6% of the portfolio.
These new ETFs look to expand on FlexShares' lineup and give
them a bigger foothold in the international market. They could
also be interesting picks for investors seeking more income
choices in today's low rate environment (see
4 Best New ETFs of 2012
Holdings look to be relatively similar throughout the trio,
though there are a few differences between the sector and
national allocation levels. Beyond that though, the different
beta targets look to be the biggest change among the group, so
this metric should be the focus for investors seeking to choose
between the trio for new international dividend ETF exposure.
For those who like this system but prefer domestic
stocks, it is worth noting that FlexShares has three such ETFs.
, seek to apply the DQS system with a U.S.-focus, and thus could
be great complements to the new trio of international funds for
Want the latest recommendations from Zacks Investment
Research? Today, you can download
7 Best Stocks for the Next 30 Days
Click to get this free report >>
FLEXS-MRN GUNR (GUNR): ETF Research Reports
(IQDE): Get Free Report
(IQDF): Get Free Report
(IQDY): Get Free Report
FLEXS-Q DIV DEF (QDEF): ETF Research Reports
FLEXS-QLTY DIV (QDF): ETF Research Reports
FLEXS-Q DIV DYN (QDYN): ETF Research Reports
FLEXS-IB 3Y TAR (TDTT): ETF Research Reports
To read this article on Zacks.com click here.
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for
the Next 30 Days. Click to get this free report