The Schwab Fundamental International Large Company Index ETF (FNDF) made its debut on 08/13/2013, and is a smart beta exchange traded fund that provides broad exposure to the Broad Developed World ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is managed by Charles Schwab, and has been able to amass over $11.81 billion, which makes it one of the largest ETFs in the Broad Developed World ETFs. FNDF seeks to match the performance of the Russell RAFI Developed ex US Large Co. Index (Net) before fees and expenses.
The Russell RAFI Developed ex US Large Company Index (Net) measures the performance of the large company size segment by fundamental overall company scores, which are created using as the universe the companies included in the Russell Developed ex-U.S. Index.
Cost & Other Expenses
When considering an ETF’s total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.25% for FNDF, making it one of the cheaper products in the space.
FNDF’s 12-month trailing dividend yield is 3.46%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Shell Plc (SHEL) accounts for about 2.52% of the fund’s total assets, followed by Samsung Electronics Ltd and Toyota Motor Corp.
Its top 10 holdings account for approximately 13.11% of FNDF’s total assets under management.
Performance and Risk
So far this year, FNDF has lost about -1.33%, and is up about 8.61% in the last one year (as of 02/01/2024). During this past 52-week period, the fund has traded between $29.48 and $33.77.
The ETF has a beta of 0.88 and standard deviation of 16.47% for the trailing three-year period, making it a medium risk choice in the space. With about 946 holdings, it effectively diversifies company-specific risk.
Alternatives
Schwab Fundamental International Large Company Index ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Total International Stock ETF (VXUS) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $62.22 billion in assets, Vanguard FTSE Developed Markets ETF has $121.35 billion. VXUS has an expense ratio of 0.07% and VEA charges 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Schwab Fundamental International Large Company Index ETF (FNDF): ETF Research Reports
Vanguard FTSE Developed Markets ETF (VEA): ETF Research Reports
Vanguard Total International Stock ETF (VXUS): ETF Research Reports
Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report
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