ETF Pulse Check John Hancock Multifactor Developed International ETF

The John Hancock Multifactor Developed International ETF (JHMD) provides exposure to stocks from developed markets outside the US and Canada, covering 85% of the market capitalization in eligible countries. This ETF is designed by Dimensional Fund Advisors and follows a multi-factor approach, focusing on size, relative price, and profitability to weight its holdings. Such a strategy tilts the portfolio towards smaller companies with lower relative prices and higher profitability, offering a unique investment proposition for those seeking broad geographical exposure with an innovative weighting scheme. JHMD's appeal lies in its capacity to diversify beyond North American markets while potentially mitigating risks through its multi-factor methodology. However, investors should be aware of the potential liquidity constraints due to diverse exchange operations and the semi-annual rebalancing and reconstitution of the index.

Basic Information
The John Hancock Multifactor Developed International ETF, ticker code JHMD, is issued by Manulife, having been launched on December 15, 2016. It has an expense ratio of 0.39%, placing it in a moderate cost category. The ETF's top holdings include Vinci, Novartis, Shell, and TotalEnergies, with weights ranging from 1.61% to 0.71%. Financials dominate its sector exposure at 3.41%, followed by energy and healthcare. The fund's net flow ratios over the past 7 and 30 days stand at 0.09% and 0.10%, respectively. Its performance shows a 6-month return of 14.29%, declining over longer periods to a 3-year average return of 3.83%. Volatility, measured by return standard deviation, rises from 5.38% over 6 months to 11.05% over three years. Notably, the ETF has exhibited minimal maximum return drawdowns, emphasizing its resilience in unstable markets.

News Summary
Recent macroeconomic and geopolitical developments could significantly influence the JHMD ETF. Heightened trade tensions between the US and India, as evidenced by proposed tariffs on Indian goods, could affect energy sector holdings like Shell and TotalEnergies due to potential volatility in global energy markets. Additionally, potential US tariffs on Swiss goods present a risk to Swiss-based holdings such as Novartis and Roche, which might face increased operational costs. On the financial front, potential interest rate cuts by the Federal Reserve could impact financial sector holdings like Deutsche Bank and HSBC, balancing reduced net interest margins with possible economic stimulation. Moreover, New Zealand's shift away from traditional fuel taxes could signal broader global trends that might affect the energy sector's demand dynamics.

Analyst Rating: Hold
The John Hancock Multifactor Developed International ETF's current evaluation reveals a mixed profile. Its expense ratio is reasonably moderate, while capital flow metrics are lackluster, indicating tepid investor interest. The ETF's returns have shown a downward trend over time, with considerable volatility, although premium stability remains strong. Its diversified exposure across top holdings and sectors suggests a well-balanced portfolio. Despite these strengths, the ETF's performance and flow metrics warrant a “Hold” rating as future growth potential and investor interest remain uncertain.

Backtest Scenario
In a backtest scenario during the 2020 financial market volatility triggered by the pandemic, the John Hancock Multifactor Developed International ETF demonstrated resilience. It outperformed its benchmark, the MSCI EAFE Index, by 1.46% over the 12-month period ending December 31, 2020. The ETF maintained a stable dividend yield of approximately 3%, providing consistent income amidst market turbulence. Its multifactor approach and international diversification helped mitigate risks associated with the pandemic, reducing exposure to specific regional downturns. Effective risk management was evident through a low tracking error relative to the benchmark, highlighting the ETF's capability to navigate challenging market conditions.

Risk Outlook
The John Hancock Multifactor Developed International ETF faces several forward-looking risks. Geopolitical tensions, such as the US-India trade conflict, could impact holdings in the energy sector. Potential US tariffs on Swiss goods pose a risk to Swiss healthcare companies within the ETF. Macroeconomic changes, including possible Federal Reserve interest rate cuts, present both risks and opportunities for financial sector holdings. While liquidity risk remains muted, sector concentration, particularly in financials and energy, highlights susceptibility to sector-specific disruptions. Overall, the ETF's risk profile is sensitive to geopolitical, economic, and sector-specific factors that could influence its performance.

Conclusion
The John Hancock Multifactor Developed International ETF is suitable for balanced investors seeking diversified exposure to developed markets outside North America, with a multifactor approach that enhances risk management. Investors should monitor geopolitical developments and macroeconomic shifts that could impact the ETF's diverse holdings and sector allocations.