Launched on 04/28/2015, the iShares MSCI USA Multifactor ETF (LRGF) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is managed by Blackrock, and has been able to amass over $832.13 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, LRGF seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index.
The MSCI USA Diversified Multiple-Factor Index is composed of U.S. large and mid-capitalization stocks that have favourable exposure to target style factors subject to constraints.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.20%.
The fund has a 12-month trailing dividend yield of 1.69%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 30.20% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Industrials round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 4.06% of the fund's total assets, followed by Walmart Inc (WMT) and Target Corp (TGT).
Its top 10 holdings account for approximately 26.91% of LRGF's total assets under management.
Performance and Risk
The ETF has added roughly 1.52% so far this year and is up about 8.98% in the last one year (as of 10/22/2020). In the past 52-week period, it has traded between $22.90 and $35.80.
The fund has a beta of 0.99 and standard deviation of 23.30% for the trailing three-year period, which makes LRGF a medium risk choice in this particular space. With about 147 holdings, it effectively diversifies company-specific risk.
IShares MSCI USA Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $36.83 billion in assets, Vanguard Value ETF has $52.13 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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iShares MSCI USA Multifactor ETF (LRGF): ETF Research Reports
Target Corporation (TGT) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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