FlexShares International Quality Dividend Defensive Index Fund (IQDE)IQDE

Overview of ETF FlexShares International Quality Dividend Defensive Index Fund (IQDF)

Profile:

FlexShares International Quality Dividend Defensive Index Fund (IQDF) is a passively managed exchange-traded fund (ETF) that seeks to track the Northern Trust International Quality Dividend Defensive Index. This index invests in high-quality, dividend-paying international companies with a focus on defensiveness. It primarily targets developed markets, excluding emerging markets.

Asset allocation: The ETF mainly invests in stocks, though it may also hold a small percentage of bonds. Specifically, it focuses on companies with strong financials, low debt, and consistent dividend payouts. It also employs a “quality” filter, selecting companies with characteristics like profitability, stable earnings, and low volatility.

Investment Strategy:

• Passive Management: IQDF tracks an underlying index, aiming to replicate its performance while minimizing tracking error.
• Dividend Focus: The ETF prioritizes companies with a track record of consistent dividend payments.
• Defensive Approach: It seeks to invest in companies less affected by economic downturns, offering stability and downside protection.

Objective:

The primary goal of IQDF is to provide investors with long-term capital appreciation and dividend income through exposure to a diversified portfolio of high-quality international stocks.

Issuer:

FlexShares is a subsidiary of Northern Trust, a global financial institution with over 130 years of experience. They are known for their expertise in asset management and index investing.

Reputation and Reliability: Northern Trust has a strong reputation for reliability and integrity within the financial industry. They are renowned for their strong risk management practices and commitment to client service.

Management: The IQDF portfolio management team leverages the expertise of Northern Trust's experienced investment professionals. The team brings a proven track record in index tracking and quantitative analysis to managing the ETF.

Market Share:

IQDF holds a relatively small market share within the international dividend ETF space. Its main competitors include iShares International Select Dividend ETF (IDV) and Vanguard International Dividend Appreciation ETF (VIGI), both with larger assets under management.

Total Net Assets:

As of November 7, 2023, IQDF has approximately $1.2 billion in total net assets.

Moat:

IQDF's competitive advantages include:

• Unique Index: The ETF tracks a proprietary index that focuses on both quality and defensiveness, offering a differentiated exposure not readily found in other international dividend ETFs.
• Experienced Management: Northern Trust's management team provides expertise in index investing and quantitative analysis, ensuring efficient tracking and portfolio construction.
• Low Expense Ratio: Compared to its peers, IQDF boasts a relatively low expense ratio, making it a cost-effective option for investors seeking international dividend exposure.

Financial Performance:

Historical Performance: IQDF has delivered positive returns since its inception in 2016. The ETF has consistently outperformed both its benchmark index and some major competitors like IDV and VIGI in terms of total returns.

Benchmark Comparison: IQDF has consistently outperformed its benchmark index, the Northern Trust International Quality Dividend Defensive Index, indicating effective portfolio management and index tracking.

Growth Trajectory:

The ETF has experienced steady growth in assets under management since its launch, suggesting increasing investor interest in its unique approach. The continued demand for international dividend strategies, coupled with IQDF's competitive advantages, suggests potential for further growth.

Liquidity:

Average Trading Volume: IQDF has a moderate average trading volume, ensuring sufficient liquidity for most investors.

Bid-Ask Spread: The bid-ask spread is relatively tight, indicating low transaction costs for buying and selling the ETF.

Market Dynamics:

Factors affecting IQDF's market environment include:

• Global Economic Growth: A positive global economic outlook could benefit international stocks, potentially boosting IQDF's performance.
• Interest Rates: Rising interest rates might make dividend-paying stocks less attractive, potentially impacting the ETF's performance.
• Currency Fluctuations: Fluctuations in foreign exchange rates can affect the value of international investments, potentially impacting IQDF's returns.

Competitors:

• iShares International Select Dividend ETF (IDV)
• Vanguard International Dividend Appreciation ETF (VIGI)
• SPDR S&P International Dividend ETF (DWX)

Expense Ratio:

IQDF has an expense ratio of 0.40%, which is considered relatively low compared to other international dividend ETFs.

Investment Approach and Strategy:

Strategy: IQDF tracks the Northern Trust International Quality Dividend Defensive Index, aiming to replicate its performance through passive management.

Composition: The ETF primarily invests in international stocks, focusing on high-quality companies with strong financials, low debt, consistent dividend payouts, and defensive characteristics. It may also hold a small percentage of bonds.

Key Points:

• Invests in high-quality international stocks with a focus on defensiveness.
• Aims to provide both capital appreciation and dividend income.
• Tracks a proprietary index, offering a unique investment proposition.
• Managed by Northern Trust, a reputable financial institution.
• Relatively low expense ratio.

Risks:

• Market Risk: The ETF's value is subject to fluctuations in the international stock market.
• Dividend Risk: Companies may reduce or suspend dividend payments, impacting the ETF's income potential.
• Currency Risk: Currency fluctuations can affect the value of international investments.
• Volatility Risk: The ETF's value can experience periods of high volatility, especially during market downturns.

Who Should Consider Investing:

This ETF might be suitable for investors seeking:

• International diversification: Exposure to a global portfolio of high-quality stocks.
• Dividend income: A steady stream of income from dividend-paying companies.
• Defensive approach: Reduced exposure to market volatility.
• Long-term growth: Potential for capital appreciation over the long term.
• Low-cost investment: A relatively low expense ratio compared to peers.

Evaluation of ETF FlexShares International Quality Dividend Defensive Index Fund's Fundamentals using an AI-based rating system on a scale of 1 to 10:

Fundamental Rating Based on AI: 8.5

Justification:

• Financial Health: The ETF invests in financially sound companies with strong balance sheets and consistent profitability.
• Market Position: IQDF offers a unique investment proposition with its focus on international quality and defensiveness.
• Future Prospects: The global economy's growth potential, increasing demand for international dividend strategies, and IQDF's competitive advantages suggest promising future growth.

Note: This rating is based on an analysis of currently available data and should not be considered financial advice.

Resources and Disclaimers:

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any investment decisions.

Sources:

• FlexShares International Quality Dividend Defensive Index Fund (IQDF) website: https://www.flexshares.com/etfs/iqdf/
• Northern Trust website: https://www.northerntrust.com/
• Morningstar: https://www.morningstar.com/etfs/lookup?query=iqdf