Paris, France – A thorough evaluation of exchange-traded funds (ETFs) is crucial for investors seeking to assess past performance and portfolio metrics. In this ongoing series, we delve into the FNDF strategy, focusing on the Schwab Fundamental International Large Company Index ETF.
Listed on 08/15/2013, FNDF tracks the Russell RAFI™ Developed ex US Large Company Index, managing $12.8B in assets with 928 holdings. The ETF boasts a net expense ratio of 0.25% and a 30-day SEC yield of 2.93%, paying distributions semi-annually.
According to FTSE Russell, the underlying index utilizes the RAFI methodology, which emphasizes company size based on fundamental metrics, rather than market capitalization. The index selects and weights securities in the FTSE Global Total Cap Index, using a fundamental score derived from adjusted sales, retained operating cash flow, and dividends plus buybacks.
The index includes the top 87.5% of companies based on cumulative fundamental score, undergoing annual calculation and quarterly partial reconstitution. With a portfolio turnover rate of 10.8% in the most recent fiscal year, FNDF offers diversification and low individual company risk.
Europe dominates FNDF’s portfolio, accounting for approximately 49% of asset value, followed by Japan at 26.6% and the UK at 14.6%. The ETF overweights Japan, European countries, and South Korea compared to its benchmark, while excluding developing markets like China, India, and Taiwan.
Sector-wise, financials (18.8%) and industrials (15.4%) make up the top sectors in FNDF’s holdings. The ETF notably overweights materials, energy, and utilities, while underweighting technology, healthcare, and real estate.
Furthermore, FNDF’s top ten holdings, representing 12.6% of assets, demonstrate a well-diversified portfolio with low risks associated with individual company performance. Noteworthy holdings include SHELL PLC, SAMSUNG ELECTRONICS LTD, and TOYOTA MOTOR CORP.
FNDF stands out for its competitive valuation metrics, showing lower aggregate valuations compared to its benchmark. While earnings growth slightly outperforms, sales and cash flow growth rates fall short when compared to the benchmark.
Since its inception, FNDF has outperformed its benchmark, IXUS, by 1% in annualized return. However, the ETF carries slightly higher risk, as indicated by maximum drawdown and volatility measures. Over the past 12 months, the performance gap between FNDF and IXUS has widened.
In conclusion, the Schwab Fundamental International Large Company Index ETF presents a compelling investment opportunity for those seeking exposure to international equities through a well-diversified portfolio. With a focus on fundamental metrics and strategic sector allocation, FNDF showcases consistent outperformance and competitive valuation metrics compared to its peers.
