ETF Pulse Check Navigating Global Equities with the NYLI Candriam International Equity Index

The NYLI Candriam International Equity ETF, under the ticker IQSI, strategically focuses on developed-market stocks selected using ESG criteria and weighted by market capitalization. Designed to provide investors with exposure to international developed companies that adhere to environmental, social, and corporate governance standards, it employs a comprehensive index methodology developed by IndexIQ and Candriam. This approach integrates sector-specific analysis, issuer-specific factors such as corporate governance and labor practices, and macro-level sustainability trends like health and wellness to form its index. The fund's relevance is underscored by its focus on top-performing companies within each sector and its stringent screening process for ESG compliance, ensuring sustainability is at the forefront. With quarterly rebalancing, IQSI aims to maintain its strategic investment outlook amid evolving market conditions.

Basic Information
The NYLI Candriam International Equity ETF, traded under the code IQSI, is issued by New York Life and debuted on December 17, 2019. It boasts an expense ratio of 0.15%, positioning it as a cost-effective option within the ETF landscape. The top holdings include industry giants such as SAP, ASML, Nestle, and Novartis, with weights of 2.65%, 2.56%, 2.15%, and 2.02%, respectively. Health Care, Information Technology, and Industrials represent the largest sector exposures, accounting for 5.68%, 5.21%, and 3.78% of the fund, respectively. Despite its diverse portfolio, the ETF has displayed minimal capital flow movement, with zero net flow ratios over the 7-day period and a mere 0.02% over 30 days. Its returns over six months, one year, and three years show average performances of 9.42%, 8.47%, and 2.50%, respectively, with volatility figures maintaining relative stability.

News Summary
The current news landscape for the healthcare sector, which is the ETF's largest exposure, reveals significant developments. Reports from multiple sources highlight ongoing regulatory challenges and policy shifts, including debates surrounding healthcare funding in the U.S. and vaccine guidelines, which could impact international healthcare companies like Novartis and Roche. Additionally, geopolitical tensions, particularly involving trade disruptions between the U.S. and Asian countries, could affect companies within the ETF, such as ASML and Siemens. Furthermore, macroeconomic issues like the potential deglobalization trend, driven by U.S. policies, pose risks to the ETF's holdings concentrated in European and Asian markets.

Analyst Rating: Hold
The NYLI Candriam International Equity ETF, symbolized by IQSI, presents a balanced profile for potential investors. Its cost efficiency, with an expense ratio of 0.15%, is noteworthy among peers. However, current capital flows suggest a lack of significant investor engagement, as evidenced by negligible net flow ratios. While its six-month and one-year returns are relatively robust, the three-year average reveals performance challenges. The ETF maintains moderate volatility, indicating return stability and minimal concentration risks, with the top 15 holdings comprising only 24.39% of the portfolio. Given these factors, a 'Hold' rating is assigned, reflecting both the fund's strengths and areas requiring more caution.

Backtest Scenario
During the 2020 COVID-19 pandemic, the NYLI Candriam International Equity ETF faced significant challenges, particularly within the healthcare sector. The pandemic-induced global market volatility and sector-specific disruptions, such as staffing shortages and reduced hospital capacities, negatively impacted the ETF's performance. This period highlighted the vulnerabilities of international equities to sudden global health and economic crises, with the ETF experiencing a notable decline in stock prices. The varied responses to the pandemic across countries further complicated the performance of the ETF, which holds diverse international equities.

Risk Outlook
The NYLI Candriam International Equity ETF faces several forward-looking risks that could influence its performance. The healthcare sector, which comprises a significant portion of the ETF's holdings, is experiencing regulatory uncertainties, particularly around vaccine guidance and healthcare funding in the U.S. Geopolitical tensions, such as trade disruptions with the Philippines, may impact companies like ASML and Siemens that rely on global supply chains. Additionally, shifts in Japan's corporate governance could lead to strategic realignments in firms like Toyota and Sony, affecting their stock stability. Broader macro-level risks include potential deglobalization trends and policy changes in the U.S., which could alter market dynamics and pose liquidity risks for the ETF.

Conclusion
The NYLI Candriam International Equity ETF offers a well-rounded investment proposition with its ESG-focused approach and sector diversification. While it is suited for balanced investors seeking exposure to international equities, monitoring geopolitical developments, sector-specific regulations, and macroeconomic trends will be crucial in assessing future performance. As it navigates the complexities of global markets, the ETF remains a cautiously optimistic choice for those mindful of its inherent risks and opportunities.