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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
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The iShares ESG Aware MSCI USA ETF (ESGU - Free Report) made its debut on 12/01/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth 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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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
Because the fund has amassed over $24.84 billion, this makes it the largest ETF in the Style Box - All Cap Growth. ESGU is managed by Blackrock. Before fees and expenses, this particular fund seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
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.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
ESGU's 12-month trailing dividend yield is 1.45%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
ESGU's heaviest allocation is in the Information Technology sector, which is about 29.50% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 5.85% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Amazon Com Inc (AMZN - Free Report) .
Its top 10 holdings account for approximately 26.27% of ESGU's total assets under management.
Performance and Risk
The ETF has lost about -6.51% and was up about 15.05% so far this year and in the past one year (as of 03/25/2022), respectively. ESGU has traded between $90.45 and $108.46 during this last 52-week period.
ESGU has a beta of 1.01 and standard deviation of 22.99% for the trailing three-year period. With about 334 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EM ETF (ESGE - Free Report) tracks MSCI Emerging Markets ESG Focus Index and the iShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index. IShares ESG Aware MSCI EM ETF has $6.46 billion in assets, iShares ESG Aware MSCI EAFE ETF has $7.35 billion. ESGE has an expense ratio of 0.25% and ESGD charges 0.20%.
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 Growth.
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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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
The iShares ESG Aware MSCI USA ETF (ESGU - Free Report) made its debut on 12/01/2016, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Growth 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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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
Because the fund has amassed over $24.84 billion, this makes it the largest ETF in the Style Box - All Cap Growth. ESGU is managed by Blackrock. Before fees and expenses, this particular fund seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
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.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
ESGU's 12-month trailing dividend yield is 1.45%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
ESGU's heaviest allocation is in the Information Technology sector, which is about 29.50% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT - Free Report) accounts for about 5.85% of the fund's total assets, followed by Apple Inc (AAPL - Free Report) and Amazon Com Inc (AMZN - Free Report) .
Its top 10 holdings account for approximately 26.27% of ESGU's total assets under management.
Performance and Risk
The ETF has lost about -6.51% and was up about 15.05% so far this year and in the past one year (as of 03/25/2022), respectively. ESGU has traded between $90.45 and $108.46 during this last 52-week period.
ESGU has a beta of 1.01 and standard deviation of 22.99% for the trailing three-year period. With about 334 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EM ETF (ESGE - Free Report) tracks MSCI Emerging Markets ESG Focus Index and the iShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index. IShares ESG Aware MSCI EM ETF has $6.46 billion in assets, iShares ESG Aware MSCI EAFE ETF has $7.35 billion. ESGE has an expense ratio of 0.25% and ESGD charges 0.20%.
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 Growth.
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.