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Is FlexShares STOXX US ESG Select Index Fund (ESG) a Strong ETF Right Now?
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Launched on 07/13/2016, the FlexShares STOXX US ESG Select Index Fund (ESG - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Blend 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
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
ESG is managed by Flexshares, and this fund has amassed over $202.99 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the STOXX USA ESG Impact Index.
The STOXX USA ESG Select KPIs Index is an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of environmental, social and governance characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX USA 900 Index.
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.32%.
ESG's 12-month trailing dividend yield is 1.12%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For ESG, it has heaviest allocation in the Information Technology sector --about 25.10% of the portfolio --while Consumer Discretionary and Healthcare round out the top three.
When you look at individual holdings, Microsoft Corp Common Stock Usd 0.00000625 (MSFT - Free Report) accounts for about 5.36% of the fund's total assets, followed by Tesla Inc Common Stock Usd 0.001 (TSLA - Free Report) and Amazon.com Inc Common Stock Usd 0.01 (AMZN - Free Report) .
Its top 10 holdings account for approximately 32.48% of ESG's total assets under management.
Performance and Risk
So far this year, ESG has lost about -5.02%, and is up roughly 16.14% in the last one year (as of 03/31/2022). During this past 52-week period, the fund has traded between $98.38 and $117.25.
The fund has a beta of 1.01 and standard deviation of 22.23% for the trailing three-year period. With about 280 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares STOXX US ESG Select Index Fund is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $7.45 billion in assets, iShares ESG Aware MSCI USA ETF has $25.41 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.
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 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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Is FlexShares STOXX US ESG Select Index Fund (ESG) a Strong ETF Right Now?
Launched on 07/13/2016, the FlexShares STOXX US ESG Select Index Fund (ESG - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Blend 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.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.
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
ESG is managed by Flexshares, and this fund has amassed over $202.99 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the STOXX USA ESG Impact Index.
The STOXX USA ESG Select KPIs Index is an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of environmental, social and governance characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX USA 900 Index.
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.32%.
ESG's 12-month trailing dividend yield is 1.12%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For ESG, it has heaviest allocation in the Information Technology sector --about 25.10% of the portfolio --while Consumer Discretionary and Healthcare round out the top three.
When you look at individual holdings, Microsoft Corp Common Stock Usd 0.00000625 (MSFT - Free Report) accounts for about 5.36% of the fund's total assets, followed by Tesla Inc Common Stock Usd 0.001 (TSLA - Free Report) and Amazon.com Inc Common Stock Usd 0.01 (AMZN - Free Report) .
Its top 10 holdings account for approximately 32.48% of ESG's total assets under management.
Performance and Risk
So far this year, ESG has lost about -5.02%, and is up roughly 16.14% in the last one year (as of 03/31/2022). During this past 52-week period, the fund has traded between $98.38 and $117.25.
The fund has a beta of 1.01 and standard deviation of 22.23% for the trailing three-year period. With about 280 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares STOXX US ESG Select Index Fund is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $7.45 billion in assets, iShares ESG Aware MSCI USA ETF has $25.41 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.
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 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.