iShares MSCI Intl Quality Factor ETF

IQLT

Market cap $13.1B

It's been a good year for international equity ETFs. As a category, broad exposure funds tapping into both developed and emerging market equities have delivered outsized gains relative to U.S. markets this year, as well as much sought portfolio diversification.

The U.S.-China trade tensions flare again. As tariffs rise, quality ETFs like QUS, SPHQ, QUAL & IQLT outperform SPY lately.

iShares Core MSCI Total International Stock ETF provides extremely broad international exposure at a very low cost but sacrifices quality by including thousands of weaker companies. IXUS's wide breadth dilutes returns, as many international firms lag U.S. peers in both growth and profitability. In contrast, quality-screened ETFs like IQLT concentrate on high-ROE, low-leverage companies, resulting in stronger returns, faster recoveries from drawdowns, and better long-term compounding despite higher valuation multiples.

iShares MSCI Intl Quality Factor ETF has a portfolio of 303 ex-U.S. stocks, weighted based on capitalization and a quality score. IQLT is well diversified across countries and holdings, with a focus on financials and industrials. IQLT looks overvalued compared to the benchmark, but has outperformed it and its close competitors since inception.

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VOO, IBIT, IXUS, IQLT and USHY emerge as the most loved ETFs of last week.

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IQLT offers exposure to about 300 quality developed market stocks, focusing on profitability, stable earnings growth, and strong balance sheets, with a 0.30% expense ratio. The fund outperformed the MSCI World ex USA Index but lagged behind the S&P 500 due to limited technology sector exposure. IQLT's growth tilt contributes to its strong performance, but currency risk remains a concern for investors.

The future looks bright. Daniel Sotiroff: As we enter the new year, I suspect a lot of you are reviewing your investments and your probably getting tired of what's happening, or should I say, what isn't happening with your foreign stock ETFs. I get it. Foreign stocks have, yet again, trailed the US market by a pretty healthy margin.