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Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

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Launched on 05/05/2010, the iShares MSCI USA Equal Weighted ETF (EUSA - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Blend 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.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

EUSA is managed by Blackrock, and this fund has amassed over $216 million, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for EUSA are 0.15%, which makes it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 1.80%.

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 17.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.

Looking at individual holdings, Match Group Inc (MTCH - Free Report) accounts for about 0.30% of total assets, followed by Tesla Inc (TSLA - Free Report) and Trade Desk Inc Class A (TTD - Free Report) .

EUSA's top 10 holdings account for about 2.3% of its total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI USA Equal Weighted ETF has lost about -5.33% so far, and is up roughly 1.61% over the last 12 months (as of 08/03/2020). EUSA has traded between $40.33 and $66.29 in this past 52-week period.

The fund has a beta of 1.15 and standard deviation of 23.09% for the trailing three-year period, which makes EUSA a medium risk choice in this particular space. With about 622 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core SP Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core SP Total U.S. Stock Market ETF has $26.37 billion in assets, Vanguard Total Stock Market ETF has $151.30 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

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 - All Cap Blend.

Bottom Line

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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