Designed to provide broad exposure to the Style Box - Small Cap Value category of the market, the Schwab Fundamental U.S. Small Company Index ETF (
FNDA Quick Quote FNDA - Free Report) is a smart beta exchange traded fund launched on 08/13/2013. 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.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
The fund is sponsored by Charles Schwab. It has amassed assets over $6.27 billion, making it one of the largest ETFs in the Style Box - Small Cap Value. Before fees and expenses, FNDA seeks to match the performance of the Russell RAFI US Small Co. Index.
The Russell RAFI US Small Company Index measures the performance of the small company size segment by fundamental overall company scores.
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.
Annual operating expenses for FNDA are 0.25%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.27%.
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.
Representing 19.50% of the portfolio, the fund has heaviest allocation to the Industrials sector; Consumer Discretionary and Financials round out the top three.
When you look at individual holdings, First Solar Inc (
FSLR Quick Quote FSLR - Free Report) accounts for about 0.42% of the fund's total assets, followed by Geo Group Reit Inc ( GEO Quick Quote GEO - Free Report) and Valmont Inds Inc ( VMI Quick Quote VMI - Free Report) .
The top 10 holdings account for about 2.36% of total assets under management.
Performance and Risk
The ETF has added about 8.22% and is down about -1.40% so far this year and in the past one year (as of 01/26/2023), respectively. FNDA has traded between $42.52 and $54.89 during this last 52-week period.
FNDA has a beta of 1.17 and standard deviation of 31.39% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 976 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Small Company Index ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 2000 Value ETF (
IWN Quick Quote IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard SmallCap Value ETF ( VBR Quick Quote VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $12.43 billion in assets, Vanguard SmallCap Value ETF has $25.33 billion. IWN has an expense ratio of 0.23% and VBR charges 0.07%.
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 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.