Designed to provide broad exposure to the Broad Developed World ETFs category of the market, the Invesco S&P International Developed Quality ETF (IDHQ) is a smart beta exchange traded fund launched on 06/13/2007.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Invesco. It has amassed assets over $375.36 million, making it one of the average sized ETFs in the Broad Developed World ETFs. IDHQ seeks to match the performance of the S&P Quality Developed ex US LargeMidCap Index before fees and expenses.
The S&P Quality Developed ex US LargeMidCap Index tracks the performance of stocks in the S&P Developed Ex-US LargeMidCap Index that have the highest quality score, which is calculated based on three fundamental measures, return on equity, accruals ratio and financial leverage ratio.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.29% for IDHQ, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.38%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Novartis Ag (NOVN) accounts for about 5.20% of the fund's total assets, followed by Nestle Sa (NESN) and Novo Nordisk A/s (NOVOB).
Its top 10 holdings account for approximately 34.63% of IDHQ's total assets under management.
Performance and Risk
The ETF has added roughly 2.81% so far this year and is up about 3.13% in the last one year (as of 12/27/2024). In the past 52-week period, it has traded between $27.84 and $32.14.
IDHQ has a beta of 0.91 and standard deviation of 17.08% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 196 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P International Developed Quality ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Total International Stock ETF (VXUS) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $74.42 billion in assets, Vanguard FTSE Developed Markets ETF has $132.58 billion. VXUS has an expense ratio of 0.08% and VEA charges 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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