ICOW tracks the 100 companies with the highest free cash flow yields among the constituents of a developed markets index. It emphasizes actual cash flow over accounting earnings, identifying financially solid global companies.

It suits investors looking for high-quality value stocks with abundant cash flow and attractive valuations in developed markets outside the US.

Launched in 2017 by Pacer ETFs, it is a passively managed (index-tracking) ETF.

The fund first screens developed-market companies, excluding the financial sector, for those above a certain market capitalization threshold. It then selects the top 100 stocks based on free cash flow yield over the trailing 12 months. Each stock is weighted according to its cash flow yield, with a cap on individual weights to ensure diversification.

• Factor investing centered on free cash flow yield
• Value stock selection specialized in developed markets outside the US

Assets under management (AUM) stand at $1.8B, and the total expense ratio is 0.65% per year.

Because it uses actual cash generation ability as its core metric, it aims for results that differ from typical value ETFs that rely only on book earnings.

Even amid global economic volatility, companies with solid cash flow tend to show relatively stable share price movements. In particular, when the value stock theme comes into favor, the fund can post solid returns within developed markets.

Driven by global asset allocation demand to reduce concentration in the US market, inflows into the developed-market value theme have been observed. As confidence in cash flow-based strategies grows, the fund's assets have remained steady.

The fund enables investment in high-quality value stocks backed by abundant cash flow, but investors should consider sector concentration resulting from the exclusion of financials, as well as currency fluctuation risk in international markets.

Among the products shown in the table, VYMI and VIGI are Vanguard's dividend-focused products, concentrating on high dividends and dividend growth respectively, while DFAI, DFIC, and DFAX use Dimensional's factor-based strategies. What sets ICOW apart is that it conducts its valuation using a single metric, free cash flow. Other alternatives include COWZ, the US version, and CALF, which targets small-cap stocks. For pan-European value stocks, consider VGK, and to add Japanese value stocks, DXJ or EWJ can be reviewed alongside.

ICOW is a tool worth considering for investors who value corporate cash generation ability in global markets. However, before investing, use the following checklist to confirm that it fits your investment style.

The fund can react sensitively to external variables such as international developments and changes in global supply chains, and if growth in developed markets stalls, returns may be limited even with a value strategy.

For value investors who prize financial soundness and cash flow, it is an excellent alternative for gaining exposure to developed markets outside the US. It is well suited as a strategic asset for pursuing portfolio stability and a valuation edge at the same time.