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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) made its debut on 06/04/2014, and is a smart beta exchange traded fund that provides broad exposure to the Broad Developed World ETFs category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader 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.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

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 State Street Global Advisors, and has been able to amass over $886.80 million, which makes it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the MSCI EAFE Factor Mix A-Series Index.

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

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.

Annual operating expenses for this ETF are 0.30%, making it on par with most peer products in the space.

QEFA's 12-month trailing dividend yield is 1.92%.

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.

Taking into account individual holdings, Roche Holding Ltd (ROG-CH) accounts for about 2.64% of the fund's total assets, followed by Nestle S.a. (NESN-CH) and Novo Nordisk A/s Class B (NOVO.B-DK).

The top 10 holdings account for about 16.97% of total assets under management.

Performance and Risk

Year-to-date, the SPDR MSCI EAFE StrategicFactors ETF has gained about 9.63% so far, and it's up approximately 12.50% over the last 12 months (as of 12/14/2021). QEFA has traded between $68.59 and $79.35 in this past 52-week period.

The ETF has a beta of 0.74 and standard deviation of 19.76% for the trailing three-year period, making it a medium risk choice in the space. With about 705 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 $55.53 billion in assets, iShares Core MSCI EAFE ETF has $100.02 billion. EFA has an expense ratio of 0.32% 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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