A smart beta exchange traded fund, the Schwab Fundamental U.S. Large Company Index ETF (
FNDX Quick Quote FNDX - Free Report) debuted on 08/13/2013, and offers broad exposure to the Style Box - Large Cap Value 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.
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.
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
FNDX is managed by Charles Schwab, and this fund has amassed over $8.53 billion, which makes it one of the larger ETFs in the Style Box - Large Cap Value. Before fees and expenses, FNDX seeks to match the performance of the Russell RAFI US Large Co. Index.
The Russell RAFI US Large Company Index measures the performance of the large company size segment by fundamental overall company scores.
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 0.25% for FNDX, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0%.
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.
FNDX's heaviest allocation is in the Information Technology sector, which is about 16.10% of the portfolio. Its Financials and Healthcare round out the top three.
When you look at individual holdings, Apple Inc (
AAPL Quick Quote AAPL - Free Report) accounts for about 4.39% of the fund's total assets, followed by Exxon Mobil Corp ( XOM Quick Quote XOM - Free Report) and Microsoft Corp ( MSFT Quick Quote MSFT - Free Report) .
Its top 10 holdings account for approximately 19.55% of FNDX's total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Large Company Index ETF has lost about -17.83% so far, and is down about -9.46% over the last 12 months (as of 10/03/2022). FNDX has traded between $47.76 and $59.90 in this past 52-week period.
FNDX has a beta of 0.99 and standard deviation of 24.73% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 729 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Large Company Index ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 1000 Value ETF (
IWD Quick Quote IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF ( VTV Quick Quote VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $47.19 billion in assets, Vanguard Value ETF has $89.43 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.
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 Value.
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.