The move to develop an international version of the domestic fund is a logical move. “People may not realize that the United States makes up only half of Morningstar’s research universe,” says Rakszawski. He adds that “we’ve had a lot of long-term success with Morningstar’s research.”
The newly launched international fund carries a 0.56 percent expense ratio, slightly higher than the 0.49 percent fee charged for the domestic fund.
What should you expect in terms of performance? Because of the funds’ geographic and industry concentrations, it’s difficult to make apples-to-apples comparisons. Still, it’s fair to look at long-term back-tested performance data.
Looking at the domestic fund, Conover points out that the underlying Morningstar wide moat index, which has been tracked since 2002, has sharply outperformed its index benchmark. While the wide moat index has returned 14.5 percent annually since 2002, the S&P 500 has returned just 9.4 percent annually.
In a similar vein, an international moat index has been tracked by Morningstar since 2004, delivering an 11.6 percent annualized return since then, while the Morningstar Global Markets ex-U.S. index has had a 5.9 percent annual gain in that time.
Still, it’s hard to spot outperformance for the domestic fund since it started trading in 2012. The domestic MOAT fund has delivered a 17.3 percent annualized gain over the past three years, according to Morningstar. That lags the S&P 500 benchmark by a full percentage point.
How to explain the difference between the three-year and long-term results? Perhaps we can conclude that a portfolio of wide moat stocks can generally keep pace in a bull market environment and really shows its mettle in weak market conditions.
Whether that logic applies to the newly launched international moat fund remains to be seen. But it is clear that both of these funds have established impressive long-term gains. That’s a key consideration, since these are really buy-and-hold ETFs rather than trading vehicles. After all, once a company establishes a wide moat, it tends to maintain it well into the future.