Back to top

Image: Bigstock

Is iShares MSCI Intl SmallCap Multifactor ETF (ISCF) a Strong ETF Right Now?

Read MoreHide Full Article

Making its debut on 04/28/2015, smart beta exchange traded fund iShares MSCI Intl SmallCap Multifactor ETF (ISCF - Free Report) provides investors broad exposure to the Broad Developed World ETFs 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.

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.

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

ISCF is managed by Blackrock, and this fund has amassed over $389.08 million, which makes it one of the average sized ETFs in the Broad Developed World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the MSCI World exUSA Small Cap Diversified Multiple-Factor Index.

The MSCI World exUSA Small Cap Diversified Multiple-Factor Index is designed to select equity securities from MSCI World ex USA Small Cap Index that have high exposure to four investment style factors: value, quality, momentum and low size.

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 0.40% for ISCF, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 5.29%.

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.

Taking into account individual holdings, K+s Ag (SDF) accounts for about 1.01% of the fund's total assets, followed by Signify Nv (LIGHT) and Man Group Plc .

Its top 10 holdings account for approximately 7.36% of ISCF's total assets under management.

Performance and Risk

The ETF has lost about -20.34% so far this year and is down about -23.08% in the last one year (as of 09/07/2022). In the past 52-week period, it has traded between $27.95 and $38.65.

The fund has a beta of 0.94 and standard deviation of 22.25% for the trailing three-year period, which makes ISCF a medium risk choice in this particular space. With about 708 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI Intl SmallCap Multifactor ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Total International Stock ETF (VXUS - Free Report) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA - Free Report) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $45.06 billion in assets, Vanguard FTSE Developed Markets ETF has $89.59 billion. VXUS has an expense ratio of 0.07% and VEA charges 0.05%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

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.

Published in