Investors Eye OEFA ETF for Potential European Rebound

Investors are shifting into international exchange-traded funds such as the ALPS O’Shares International Developed Quality Dividend ETF (OEFA) as some strategists expect European stocks to pick up in the second half of the year. OEFA has a substantial allocation to European equities and has posted year-to-date gains.

The fund, which turns 11 in August, is not a Europe-only ETF but gives heavy weight to the region: seven of its top 10 geographic exposures are European economies. That positioning means OEFA can provide significant exposure to European equities without concentrating exclusively on the region.

Some portfolio managers and institutions are adding non-U.S. developed-market exposure to reduce concentration in U.S. technology stocks. Marina Zavolock, Morgan Stanley’s chief European equity strategist, noted that investors are looking to diversify holdings that are heavily tilted toward U.S. tech and U.S. equities and added, “Consensus earnings growth for Europe this year is over 16 percent.”

Analysts and investors are also watching the fund’s sensitivity to energy costs. Many European countries import energy, and OEFA allocates about 16% of its portfolio to consumer discretionary stocks, a sector that can benefit if energy prices remain moderate and consumers have more spending power. Market participants cite narrowing valuation gaps between European and U.S. stocks as another factor to monitor; Morgan Stanley analysts have said European valuations have begun to close a long-running discount to U.S. peers.

The index for OEFA is provided by VettaFi LLC, which receives a licensing fee. VettaFi is not the issuer, sponsor or seller of OEFA and has no obligation or liability related to the fund’s issuance, administration, marketing or trading. As investors reassess regional allocations for the second half of the year, funds with outsized European exposure such as OEFA have attracted increased attention.