Making its debut on 08/13/2013, smart beta exchange traded fund Schwab Fundamental U.S. Small Company Index ETF (
FNDA Quick Quote FNDA - Free Report) provides investors broad exposure to the Style Box - Small Cap Value 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 work great for investors who believe in market efficiency. They provide 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.
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.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
FNDA is managed by Charles Schwab, and this fund has amassed over $6 billion, which makes it one of the largest ETFs in the Style Box - Small Cap Value. FNDA seeks to match the performance of the Russell RAFI US Small Co. Index before fees and expenses.
The Russell RAFI US Small Company Index measures the performance of the small 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.
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 1.57%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Representing 20.70% 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, Visteon Corp (
VC Quick Quote VC - Free Report) accounts for about 0.44% of the fund's total assets, followed by Ssc Government Mm Gvmxx (GVMXX) and Sylvamo Corp ( SLVM Quick Quote SLVM - Free Report) .
The top 10 holdings account for about 3.04% of total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Small Company Index ETF return is roughly 0.71% so far, and is down about -6.13% over the last 12 months (as of 05/31/2023). FNDA has traded between $42.52 and $53.63 in this past 52-week period.
The ETF has a beta of 1.19 and standard deviation of 23.81% for the trailing three-year period, making it a medium risk choice in the space. With about 1005 holdings, it effectively diversifies company-specific risk.
Schwab Fundamental U.S. Small Company Index ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Russell 2000 Value ETF (
IWN Quick Quote IWN - Free Report) tracks Russell 2000 Value Index and the Vanguard Small-Cap Value ETF ( VBR Quick Quote VBR - Free Report) tracks CRSP U.S. Small Cap Value Index. IShares Russell 2000 Value ETF has $10.67 billion in assets, Vanguard Small-Cap Value ETF has $23.16 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.