This ETF tracks developed-market companies outside the US that screen well on the quality factor, meaning high return on equity, stable earnings, and low leverage. It provides diversified exposure to high-quality stocks in developed markets excluding the US.

It suits long-term investors who want to diversify across developed markets outside the US while focusing on financially sound, high-quality companies.

It is a passively managed ETF (index-tracking) run by iShares.

From developed-market stocks outside the US, the index selects companies with high quality scores based on three criteria: return on equity, earnings stability, and leverage. It then assigns weights to them. Because holdings and weights are adjusted automatically every six months under the index rules, the manager's discretion is limited.

• Quality factor selection centered on financial soundness
• Diversification across developed markets outside the US

Assets under management (AUM) stand at $13.7B, and the total expense ratio is 0.30% per year.

Compared with broad developed-market ETFs, this is a factor product that narrows exposure to high-quality stocks, so its fee level compared with the category average is a key selection criterion.

The fund reflects both developed-market equity trends outside the US and currency movements. Given the nature of the quality factor, it has tended to be relatively defensive during volatile periods. Short-term performance varies with the global economy and the interest rate environment.

Fund flows follow demand to diversify away from US-concentrated portfolios and interest in factor investing. Flows also tend to shift as preferences for overseas assets change during periods of dollar strength and weakness.

Its strength is diversification across financially sound developed-market stocks, while its drawback is exposure to non-US markets and currency swings.

The IHDG, IQDF, and IDHQ shown in the table are comparison candidates in the same developed-market ex-US quality and dividend category, and they differ in dividend weighting, currency hedging, and fee levels. Other direct comparisons include the broad core ETFs IEFA and EFA, which diversify across developed markets outside the US in general. You can also consider IMTM (momentum) and IVLU (value), which target other factors in the same developed ex-US market, as well as QUAL, which applies the same quality factor to US large-cap stocks.

Here are the points to review before investing in IQLT. Because the fund diversifies across high-quality developed-market stocks outside the US, it is wise to check holding costs, currency effects, regional composition, and the degree of quality factor exposure in advance.

Relative performance differences from excluding the US market, along with currency movements, are the main drivers of short-term volatility. You should also keep in mind that the fund can underperform broad indexes when the quality factor lags.

It is a suitable choice for long-term investors who want factor-based diversification across high-quality developed-market stocks outside the US. If broad diversification is the priority, compare it with IEFA and EFA, and if you want exposure to other factors, compare it with IMTM and IVLU.