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

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The John Hancock Multifactor Small Cap ETF (JHSC - Free Report) was launched on 11/08/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

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.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of 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

Because the fund has amassed over $323.07 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. JHSC is managed by John Hancock. Before fees and expenses, JHSC 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 JHSC are 0.42%, which makes it one of the more expensive products in the space.

The fund has a 12-month trailing dividend yield of 1.37%.

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.

For JHSC, it has heaviest allocation in the Industrials sector --about 18.20% of the portfolio --while Financials and Consumer Discretionary round out the top three.

Taking into account individual holdings, Regal Rexnord Corp (RRX - Free Report) accounts for about 0.69% of the fund's total assets, followed by Huntsman Corp (HUN - Free Report) and Mattel Inc (MAT - Free Report) .

The top 10 holdings account for about 5.45% of total assets under management.

Performance and Risk

So far this year, JHSC has lost about -21.59%, and is down about -14.77% in the last one year (as of 06/21/2022). During this past 52-week period, the fund has traded between $28.30 and $37.86.

The fund has a beta of 1.13 and standard deviation of 27.71% for the trailing three-year period. With about 466 holdings, it effectively diversifies company-specific risk.

Alternatives

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 $51.60 billion in assets, iShares Core S&P SmallCap ETF has $57.98 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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