IVSI targets international large-cap stocks using Applied Finance's Intrinsic Value Strategy (IVS), a quantitative approach that identifies companies trading below their calculated intrinsic worth. This ETF brings systematic value investing to developed markets outside the US, where pricing inefficiencies may be more pronounced than in domestic markets.
How It Works
The fund employs Applied Finance's proprietary valuation model that adjusts traditional metrics for accounting distortions and focuses on economic profit rather than reported earnings. It selects approximately 100-150 large-cap stocks from developed international markets, weighting positions based on the discount to intrinsic value and company quality scores. The portfolio rebalances quarterly to capture valuation changes while maintaining reasonable turnover. Unlike traditional value indexes that rely on simple P/E or P/B ratios, this approach incorporates forward-looking cash flow projections and competitive advantage assessments.
Key Features
- Zero expense ratio makes it the cheapest way to access systematic international value investing
- Proprietary valuation model goes beyond simple value metrics to identify mispriced quality companies
- Quarterly rebalancing captures valuation shifts without excessive trading costs
Risks
- Brand new fund with no track record - the IVS methodology's effectiveness in international markets is unproven
- Currency risk from unhedged international exposure could add 10-15% annual volatility on top of equity risk
- Value strategies can underperform for extended periods - international value has lagged growth by 30%+ over the past decade
Who Should Own This
Best suited for cost-conscious investors who believe international markets offer better value opportunities than the US and want exposure to a systematic approach beyond simple factor investing. Works as a 10-20% allocation within the international equity sleeve for those comfortable with an unproven strategy. The zero expense ratio makes it attractive for long-term holders willing to accept model risk in exchange for no ongoing fees.