How does the IQDY ETF select its investments?

The IQDY ETF uses a rules-based investment approach that utilizes proprietary HIP (Human Impact + Profit) Ratings data from HIP Investor, Inc. The fund's investment process starts by screening municipal securities based on their SDGs 9, 11, and 12 ratings, as well as their Environmental, Social, and Governance (ESG) ratings and Climate-Threat and Resilience ratings by HIP. The ETF then narrows down the universe of eligible investments to municipal securities that are believed to fund operations or projects supporting sustainable development and positive social and environmental outcomes.

What are the Sustainable Development Goals (SDGs) 9, 11, and 12?

The SDGs are a set of global goals adopted by the United Nations General Assembly to achieve sustainable development worldwide. SDG 9 aims to "build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation." SDG 11 seeks to "make cities and human settlements inclusive, safe, resilient, and sustainable," and SDG 12 aims to "ensure sustainable consumption and production patterns."

What types of municipal securities are included in the IQDY ETF's portfolio?

The IQDY ETF primarily invests in investment-grade municipal debt securities issued by U.S. states, municipal governments, political subdivisions, agencies, instrumentalities, U.S. territories, and possessions. The securities may fund various operations or projects related to infrastructure development, education, healthcare, environmental management, clean energy, inclusive industrialization, climate resilience, and sustainable consumption patterns.

What are the benefits of investing in the IQDY ETF?

Investing in the IQDY ETF offers the potential for tax-exempt income since it primarily invests in municipal debt securities. Additionally, investors can align their investments with sustainable development goals and support positive social and environmental outcomes. The ETF's diversification across various municipal issuers and securities can help reduce credit risk.

5 min read

By Ron Koren, ETF Insider

What is the IQDY ETF ?

In the world of finance, Exchange-Traded Funds (ETFs) have gained immense popularity due to their diversified and accessible nature. One such ETF that has caught the attention of investors is IQDY, known as the International Quality Dividend ETF. In this article, we will delve into the details of the IQDY ETF, understanding its underlying index, investment strategy, benefits, and considerations before investing.

<h2>IQDY ETF: Overview <h2> The International Quality Dividend ETF (IQDY) is designed to provide exposure to a high-quality income-oriented universe of long-only international securities issued by non-U.S.-based companies. The ETF aims to deliver long-term capital growth with a targeted overall beta that generally ranges between 1.0 to 1.5 times that of the Northern Trust International Large Cap Index (Parent Index). Beta, as a measure of volatility, indicates the market sensitivity of the ETF relative to a given market index and time period. <h2>IQDY ETF Underlying and Exposure: What Does It Track and How? <h2> The IQDY ETF derives its underlying index through a meticulous selection process conducted by the Index Provider, Northern Trust International (NTI). To create the Underlying Index, NTI starts with all securities in the Parent Index and then removes those ranking in the lowest quintile of quality based on a proprietary scoring model. Additionally, companies that do not pay dividends are also excluded. The proprietary quality scoring model relies on quantitative ranking and various metrics obtained from company filings, focusing on management efficiency, profitability, and cash flow generation. After the selection process, the Index Provider optimizes the selection and weighting of eligible securities to maximize the overall quality score compared to the Parent Index. The ETF also aims to achieve an aggregate dividend yield exceeding that of the Parent Index while maintaining the desired beta target. Moreover, the optimization process includes constraints to manage active risk exposure to specific factors.

IQDY overlap What is the IQDY ETF ?

<h2>IQDY ETF: Benefits of Investing <h2> Investors are attracted to the IQDY ETF for several reasons. Firstly, it offers exposure to a diversified portfolio of high-quality international securities, which can mitigate risk and enhance long-term growth potential. The emphasis on companies that pay dividends can provide a steady income stream to investors, making it appealing for income-oriented portfolios. Additionally, the transparent and objective rules governing the Underlying Index selection and rebalancing process instill confidence in investors regarding the ETF's stability. <h2>IQDY ETF: Considerations Before Investing <h2> As with any investment, there are essential considerations to keep in mind before investing in the IQDY ETF. Since it is an international-focused ETF, it may be subject to geopolitical and economic risks in the countries where the underlying securities are domiciled. Investors should carefully evaluate their risk tolerance and assess their overall portfolio diversification strategy. Moreover, it's crucial to understand the fund's expense ratio and other associated costs to gauge its impact on returns. <h2>Conclusion: <h2> The IQDY ETF provides investors with an opportunity to gain exposure to a well-curated selection of international securities with a focus on quality and dividends. By understanding the underlying index, investment strategy, benefits, and potential considerations, investors can make informed decisions aligning with their financial goals and risk appetite.

Disclaimer:
This article is for informational purposes only and does not provide investment advisory services. Investors should conduct their own research and seek professional financial advice before making any investment decisions.

IQDY ETF issuer
IQDY ETF official page

IQDY quote and analysis

Discover the top holdings, correlations, and overlaps of ETFs using our visualization tool.
Our app allows you to build and track your portfolio.
To learn more about the IQDY FlexShares International Quality Dividend Dynamic Index Fund, access our dedicated page now.

Get started

FAQ

What is the IQDY ETF?
The IQDY ETF, also known as the iShares Sustainable MSCI Global Impact ETF, is an actively managed exchange-traded fund that aims to achieve its investment objective by investing primarily in investment-grade municipal debt securities that support sustainable development in alignment with the United Nations Sustainable Development Goals (SDGs) 9, 11, and 12.
How does the IQDY ETF select its investments?
The IQDY ETF uses a rules-based investment approach that utilizes proprietary HIP (Human Impact + Profit) Ratings data from HIP Investor, Inc. The fund's investment process starts by screening municipal securities based on their SDGs 9, 11, and 12 ratings, as well as their Environmental, Social, and Governance (ESG) ratings and Climate-Threat and Resilience ratings by HIP. The ETF then narrows down the universe of eligible investments to municipal securities that are believed to fund operations or projects supporting sustainable development and positive social and environmental outcomes.
What are the Sustainable Development Goals (SDGs) 9, 11, and 12?
The SDGs are a set of global goals adopted by the United Nations General Assembly to achieve sustainable development worldwide. SDG 9 aims to "build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation." SDG 11 seeks to "make cities and human settlements inclusive, safe, resilient, and sustainable," and SDG 12 aims to "ensure sustainable consumption and production patterns."
What types of municipal securities are included in the IQDY ETF's portfolio?
The IQDY ETF primarily invests in investment-grade municipal debt securities issued by U.S. states, municipal governments, political subdivisions, agencies, instrumentalities, U.S. territories, and possessions. The securities may fund various operations or projects related to infrastructure development, education, healthcare, environmental management, clean energy, inclusive industrialization, climate resilience, and sustainable consumption patterns.
What are the benefits of investing in the IQDY ETF?
Investing in the IQDY ETF offers the potential for tax-exempt income since it primarily invests in municipal debt securities. Additionally, investors can align their investments with sustainable development goals and support positive social and environmental outcomes. The ETF's diversification across various municipal issuers and securities can help reduce credit risk.

Try ETF Insider