Venture Outside the Home Bias With a New Factor Rotation ETF

More investors are looking to venture outside the home bias by adding more exposure globally. So it’s an opportune time for BlackRock to announce the launch of the iShares International Equity Factor Rotation Active ETF (IDYN ).

IDYN builds off the success of the iShares U.S. Equity Factor Rotation Active ETF (DYNF A-) by adding an international flavor to BlackRock’s systematic investing platform. With IDYN’s active management strategy built into the fund, the issuer also bolsters its vast ETF lineup. It does so by following the current trend of the space that’s seen a record number of active launches.

“iShares has had tremendous success gathering assets with DYNF in the last two years,” said VettaFi’s Head of Research Todd Rosenbluth. “It is great to see iShares further expand its active ETF lineup given advisor demand.”

A factor rotation strategy will offer greater diversification as opposed to a single-factor strategy. Essentially, it can serve as an all-weather option, capturing upside in certain factors while mitigating any downside seen in others. When you combine that factor rotation strategy with active management, it adds even greater flexibility and dynamism. That’s warranted in today’s market (U.S. or international), which sports uncertainty.

For inclusion as part of IDYN’s holdings, the fund looks at companies through the lens of five factors. Those are quality, value, size, volatility, momentum, and growth. More specifically, companies are screened based on their fundamental soundness (capital efficiency), intrinsic value relative to its current price, market cap (small companies with nimble operations preferred), degree of volatility (the lesser, the better), whether they are trending towards the upside, and if they exhibit high growth characteristics.

Using intensive data analysis, the portfolio managers can determine which factors receive greater weight given the current market conditions. Forward-looking insights are taken into account to determine which factors will outperform in the near term.

Because international investing carries its own nuances, active management can account for these intricacies. IDYN taps into the expertise of portfolio managers that can adjust the holdings of the fund based on market conditions. This helps mitigate macroeconomic, political, or other risk associated with international investing.

Again, the core strategy of the fund mirrors that of the U.S. equity-focused DYNF, which was selected for an ETF of the Week last year.

“This fund is going to tilt toward quality companies or towards value, or towards momentum, or a combination of those factors using the in-house expertise that BlackRock offers,” Rosenbluth said of DYNF last year. This year, it’s notable that the fund is outpacing the broader S&P 500, which a offers window into the potential performance capabilities of IDYN.

The advent of ETFs has opened the pathways for more investor ingress into international equities. This increases diversification. The iShares suite, with its ETF products that can provide exposure to broad regions or targeted exposure to single countries, evidences this.

Furthermore, encapsulating international exposure via an ETF offers a plethora of benefits inherent in the investment vehicle. These benefits include tax and cost efficiency. The benefits are further compounded when adding an active component to international investing — all inherent in IDYN.

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