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Is John Hancock Multifactor Small Cap ETF (JHSC) a Strong ETF Right Now?

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Making its debut on 11/08/2017, smart beta exchange traded fund John Hancock Multifactor Small Cap ETF (JHSC - Free Report) provides investors broad exposure to the Style Box - Small 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.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

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.

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.

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 John Hancock, and has been able to amass over $418.83 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. JHSC, before fees and expenses, seeks to match the performance of the JOHN HANCOCK DIMENSIONAL SMALL CAP INDEX.

The John Hancock Dimensional Small Cap Index is designed to comprise a subset of securities in the U.S. Universe issued by companies whose market capitalizations are smaller than the 750th largest U.S. company but excluding the smallest 4% of U.S. companies at the time of reconstitution.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.42%, making it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 1.14%.

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.

Representing 18.10% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Regal Rexnord Corp (RRX - Free Report) accounts for about 0.59% of total assets, followed by Brooks Automation Inc and Wyndham Hotels + Resorts Inc (WH - Free Report) .

JHSC's top 10 holdings account for about 4.23% of its total assets under management.

Performance and Risk

So far this year, JHSC has lost about -5.69%, and is up roughly 1.71% in the last one year (as of 02/16/2022). During this past 52-week period, the fund has traded between $32.26 and $37.86.

The fund has a beta of 1.19 and standard deviation of 26.48% for the trailing three-year period. With about 467 holdings, it effectively diversifies company-specific risk.


John Hancock Multifactor Small Cap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 ETF (IWM - Free Report) tracks Russell 2000 Index and the iShares Core S&P SmallCap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $60.79 billion in assets, iShares Core S&P SmallCap ETF has $71.24 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 - Small 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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