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Is Vident U.S. Equity Strategy ETF (VUSE) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - All Cap Value category of the market, the Vident U.S. Equity Strategy ETF (VUSE - Free Report) is a smart beta exchange traded fund launched on 01/22/2014.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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.

This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

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

Managed by Vident Financial, VUSE has amassed assets over $491.46 million, making it one of the larger ETFs in the Style Box - All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the Vident Core U.S. Equity Fund Index.

The Vident U.S. Quality Index is a rules-based, systematic strategy index comprised of equity securities principally traded in the U.S. market of issuers domiciled in the United States.

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 0.50% for this ETF, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.49%.

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.

This ETF has heaviest allocation in the Information Technology sector - about 22.20% of the portfolio. Consumer Discretionary and Financials round out the top three.

When you look at individual holdings, First Solar Inc (FSLR - Free Report) accounts for about 1.04% of the fund's total assets, followed by Dillards Inc (DDS - Free Report) and Sanmina Corporation (SANM - Free Report) .

Its top 10 holdings account for approximately 7.23% of VUSE's total assets under management.

Performance and Risk

The ETF has gained about 5.51% so far this year and is down about -0.86% in the last one year (as of 02/28/2023). In the past 52-week period, it has traded between $37.13 and $46.78.

The fund has a beta of 1.14 and standard deviation of 29.20% for the trailing three-year period, which makes VUSE a medium risk choice in this particular space. With about 232 holdings, it effectively diversifies company-specific risk.

Alternatives

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

Dimensional U.S. Targeted Value ETF (DFAT - Free Report) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV - Free Report) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $8.19 billion in assets, iShares Core S&P U.S. Value ETF has $13.07 billion. DFAT has an expense ratio of 0.29% and IUSV 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 - All Cap Value.

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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