A smart beta exchange traded fund, the iShares MSCI USA Equal Weighted ETF (EUSA - Free Report) debuted on 05/05/2010, and offers broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is managed by Blackrock, and has been able to amass over $224.17 million, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, EUSA 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for EUSA are 0.15%, which makes it one of the cheaper products in the space.
It's 12-month trailing dividend yield comes in at 1.74%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 17.30% of the portfolio. Financials and Industrials round out the top three.
Looking at individual holdings, Tesla Inc (TSLA - Free Report) accounts for about 0.36% of total assets, followed by Match Group Inc (MTCH - Free Report) and Wayfair Inc Class A (W - Free Report) .
The top 10 holdings account for about 2.73% of total assets under management.
Performance and Risk
The ETF has lost about -1.79% so far this year and is up roughly 4.53% in the last one year (as of 09/16/2020). In the past 52-week period, it has traded between $40.33 and $66.29.
The fund has a beta of 1.14 and standard deviation of 23.27% for the trailing three-year period, which makes EUSA a medium risk choice in this particular space. With about 621 holdings, it effectively diversifies company-specific risk.
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 $27.50 billion in assets, Vanguard Total Stock Market ETF has $159.86 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.
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.