IShares MSCI International Quality Factor ETF holds a diverse collection of stocks with strong balance sheets and stable earnings growth that should deliver solid risk-adjusted performance over the long run.

This fund tracks the MSCI World ex USA Sector Neutral Quality Index. It starts with all stocks in the MSCI World ex USA Index and scores them on three fundamental measures of quality, including return on equity, debt/equity, and earnings-per-share growth rate over the trailing five years. It combines these individual scores to arrive at an overall quality score for each stock and sweeps the highest-scoring names into the portfolio. It then weights these names using a combination of their quality score and their market-cap weighting in the MSCI World ex USA Index, so it leans toward the largest and highest-quality firms.

Quality stocks typically trade at higher multiples than the market, and the fund's average price/book ratio has been higher than that of the MSCI ACWI ex USA Index. But that does not mean its holdings are priced above their intrinsic value. Their lofty valuations are often supported by relatively persistent profits and stable businesses.

Large profitable firms with strong balance sheets and persistent earnings growth have another advantage. They tend to be less risky than the market and hold up better during downturns. So far, the fund has delivered on those expectations, with an average drawdown roughly 1.5 percentage points shallower than MSCI ACWI ex USA Index. That defensive nature helped it outperform the index by 1.8 percentage points per year from its launch in January 2015 through July 2023.

Analyst Rating

The highest-quality names in the foreign market.

Senior Analyst

Daniel Sotiroff

ASML Hld

Moelis

National Energy Services Reunited

Autoliv

AstraZeneca

Rogers

BHP Billiton

Novan

Suncor Energy

Woodside Energy Group Ltd

Profitable firms with strong balance sheets and stable earnings growth anchor this portfolio. The stocks it holds should be less volatile than the market and deliver better risk-adjusted performance than the MSCI ACWI ex USA Index. It earns an Above Average Process Pillar rating.

Above Average

Process

BlackRock's industry-leading technology, global footprint, and extensive supporting cast earn an Above Average People Pillar rating. The team employs BlackRock's Aladdin platform to fulfill much of its portfolio management tasks, and global trading desks allow traders to conduct foreign transactions in a cost-effective way.

The iShares index equity team has endured some internal turnover at the top over the past few years. But index-tracking performance should remain tight thanks to heavily automated processes, a large team of seasoned professionals, and several long-tenured managers that remain at the helm. Amy Whitelaw left the team in February 2023 for another role within the organization. Paul Whitehead replaced Alan Mason as a manager in January 2022, when Mason left to focus on the firm's customized institutional indexing capabilities. The broader index equity group, co-headed by Jennifer Hsui and Paul Whitehead, will continue to oversee iShares equity ETFs.

These managers interact with a wider team of traders and managers around the globe to execute the fund's day-to-day operations. The larger number of managers also limits the impact of personnel turnover when it does occur.

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares MSCI Intl Quality Factor ETF

IQLT tracks an index of large- and mid-cap stocks in developed countries, outside of the US. The index is selected and weighted for exposure to fundamental quality metrics.

iShares MSCI Intl Quality Factor ETF (IQLT) offers exposure to international equities through a quality lens. The fund tracks the performance of the MSCI World ex USA Sector Neutral Quality Index and focuses on stocks with higher quality characteristics. IQLT provides diversification across various sectors and countries, making it an attractive option for investors seeking international exposure.

IQLT: Quality, International, And Diversified Right

iShares MSCI Intl Quality Factor ETF holds about 300 ex-US international stocks, weighted based on capitalization and a quality score. The fund is well diversified across countries, sectors and holdings. It has outperformed four of the most popular factor-based ETFs in its stock universe.

IQLT: International Diversification With A Tilt To Quality And Growth

iShares MSCI Intl Quality Factor ETF holds 300 stocks from developed markets and focuses on higher ROE, stable earnings growth, and lower financial leverage. The IQLT exchange-traded fund is well-diversified across countries, sectors, and holdings, with Switzerland, the UK, and Japan being the heaviest countries in the portfolio. Historical performance of IQLT is average among competitors, but the dividend growth rate since inception has beaten inflation.

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