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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
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Launched on 12/01/2016, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth 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.
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.
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.
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.
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
The fund is managed by Blackrock, and has been able to amass over $22.25 billion, which makes it the largest ETF in the Style Box - All Cap Growth. ESGU seeks to match the performance of the MSCI USA ESG Focus Index before fees and expenses.
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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are 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 1.39%.
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.
For ESGU, it has heaviest allocation in the Information Technology sector --about 29.50% of the portfolio --while Healthcare and Financials round out the top three.
When you look at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.58% of the fund's total assets, followed by Microsoft Corp (MSFT - Free Report) and Amazon Com Inc (AMZN - Free Report) .
The top 10 holdings account for about 25.85% of total assets under management.
Performance and Risk
The ETF has lost about -18.22% so far this year and is down about -10.79% in the last one year (as of 07/25/2022). In the past 52-week period, it has traded between $81.27 and $108.46.
ESGU has a beta of 1.01 and standard deviation of 24.44% for the trailing three-year period. With about 311 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.
Vanguard ESG U.S. Stock ETF (ESGV - Free Report) tracks FTSE US ALL CAP CHOICE INDEX and the iShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index. Vanguard ESG U.S. Stock ETF has $5.74 billion in assets, iShares ESG Aware MSCI EAFE ETF has $6.56 billion. ESGV has an expense ratio of 0.09% 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?
Launched on 12/01/2016, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth 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.
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.
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.
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.
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
The fund is managed by Blackrock, and has been able to amass over $22.25 billion, which makes it the largest ETF in the Style Box - All Cap Growth. ESGU seeks to match the performance of the MSCI USA ESG Focus Index before fees and expenses.
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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are 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 1.39%.
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.
For ESGU, it has heaviest allocation in the Information Technology sector --about 29.50% of the portfolio --while Healthcare and Financials round out the top three.
When you look at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.58% of the fund's total assets, followed by Microsoft Corp (MSFT - Free Report) and Amazon Com Inc (AMZN - Free Report) .
The top 10 holdings account for about 25.85% of total assets under management.
Performance and Risk
The ETF has lost about -18.22% so far this year and is down about -10.79% in the last one year (as of 07/25/2022). In the past 52-week period, it has traded between $81.27 and $108.46.
ESGU has a beta of 1.01 and standard deviation of 24.44% for the trailing three-year period. With about 311 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.
Vanguard ESG U.S. Stock ETF (ESGV - Free Report) tracks FTSE US ALL CAP CHOICE INDEX and the iShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index. Vanguard ESG U.S. Stock ETF has $5.74 billion in assets, iShares ESG Aware MSCI EAFE ETF has $6.56 billion. ESGV has an expense ratio of 0.09% 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.