Back to top

Image: Bigstock

Is WisdomTree U.S. Multifactor ETF (USMF) a Strong ETF Right Now?

Read MoreHide Full Article

The WisdomTree U.S. Multifactor ETF (USMF - Free Report) made its debut on 06/29/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide 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.

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.

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

Managed by Wisdomtree, USMF has amassed assets over $246.78 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund seeks to match the performance of the WisdomTree U.S. Multifactor Index before fees and expenses.

The WisdomTree U.S. Multifactor Index is comprised of 200 U.S. companies with the highest composite scores based on two fundamental factors, value and quality measures, and two technical factors, momentum and correlation.

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.

Annual operating expenses for USMF are 0.28%, which makes it on par with most peer products in the space.

USMF's 12-month trailing dividend yield is 1.65%.

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.

USMF's heaviest allocation is in the Information Technology sector, which is about 25% of the portfolio. Its Healthcare and Consumer Discretionary round out the top three.

Taking into account individual holdings, Jack Henry & Associates Inc (JKHY - Free Report) accounts for about 1.70% of the fund's total assets, followed by Roper Technologies Inc (ROP - Free Report) and International Business Machines Corp (IBM - Free Report) .

The top 10 holdings account for about 11.67% of total assets under management.

Performance and Risk

The ETF has lost about -7.68% and is down about -5.57% so far this year and in the past one year (as of 11/18/2022), respectively. USMF has traded between $34.15 and $42.22 during this last 52-week period.

The fund has a beta of 0.91 and standard deviation of 23.13% for the trailing three-year period. With about 200 holdings, it effectively diversifies company-specific risk.


WisdomTree U.S. Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $39.85 billion in assets, Vanguard Total Stock Market ETF has $265.89 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

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 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.

Published in