Making its debut on 12/28/2015, smart beta exchange traded fund Legg Mason Low Volatility High Dividend ETF (
LVHD Quick Quote LVHD - Free Report) provides investors broad exposure to the Style Box - Large Cap Value category of the market. What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by Franklin Templeton Investments. It has amassed assets over $756.02 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. LVHD seeks to match the performance of the QS Low Volatility High Dividend Index before fees and expenses.
The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for this ETF are 0.27%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.91%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
When you look at individual holdings, Eaton Corp Plc accounts for about 2.64% of the fund's total assets, followed by Philip Morris Internation and Emerson Electric Co.
LVHD's top 10 holdings account for about 25.47% of its total assets under management.
Performance and Risk
So far this year, LVHD return is roughly 16.80%, and it's up approximately 30.08% in the last one year (as of 07/16/2021). During this past 52-week period, the fund has traded between $28.63 and $37.38.
LVHD has a beta of 0.80 and standard deviation of 21.62% for the trailing three-year period. With about 87 holdings, it effectively diversifies company-specific risk.
Legg Mason Low Volatility High Dividend 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 Quick Quote IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF ( VTV Quick Quote VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $53.71 billion in assets, Vanguard Value ETF has $80.83 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.