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Is SPDR MSCI EAFE StrategicFactors ETF (QEFA) a Strong ETF Right Now?

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The SPDR MSCI EAFE StrategicFactors ETF (QEFA - Free Report) was launched on 06/04/2014, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs 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.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

The fund is sponsored by State Street Global Advisors. It has amassed assets over $942.63 million, making it one of the average sized ETFs in the Broad Developed World ETFs. QEFA seeks to match the performance of the MSCI EAFE Factor Mix A-Series Index before fees and expenses.

The MSCI EAFE Factor Mix A-Series Index captures large and mid-cap representation across 22 developed market Europe, Australasia, and Far East countries and aims to represent the performance of value, low volatility, and quality factor strategies.

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.

Operating expenses on an annual basis are 0.30% for this ETF, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 2.80%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Nestle Sa Reg (NESN) accounts for about 2.39% of total assets, followed by Roche Holding Ag Genusschein (ROG - Free Report) and Asml Holding Nv (ASML - Free Report) .

Its top 10 holdings account for approximately 16.59% of QEFA's total assets under management.

Performance and Risk

The ETF has lost about -0.40% and is up roughly 12.35% so far this year and in the past one year (as of 01/11/2024), respectively. QEFA has traded between $64.42 and $73.18 during this last 52-week period.

The ETF has a beta of 0.80 and standard deviation of 15.32% for the trailing three-year period, making it a medium risk choice in the space. With about 709 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR MSCI EAFE StrategicFactors ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

IShares MSCI EAFE ETF (EFA - Free Report) tracks MSCI EAFE Index and the iShares Core MSCI EAFE ETF (IEFA - Free Report) tracks MSCI EAFE Investable Market Index. IShares MSCI EAFE ETF has $50.83 billion in assets, iShares Core MSCI EAFE ETF has $105.91 billion. EFA has an expense ratio of 0.33% and IEFA charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

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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