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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
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Launched on 12/01/2016, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth category of the market.
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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $13.75 billion, this makes it the largest ETF in the Style Box - All Cap Growth. ESGU is managed by Blackrock. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for ESGU are 0.15%, which makes it one of the cheaper products in the space.
ESGU's 12-month trailing dividend yield is 1.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
ESGU's heaviest allocation is in the Information Technology sector, which is about 29.40% of the portfolio. Its Healthcare and Financials round out the top three.
Taking into account individual holdings, Apple Inc (AAPL - Free Report) accounts for about 7.06% of the fund's total assets, followed by Microsoft Corp (MSFT - Free Report) and Amazon Com Inc (AMZN - Free Report) .
ESGU's top 10 holdings account for about 25.88% of its total assets under management.
Performance and Risk
So far this year, ESGU has added roughly 11.56%, and it's up approximately 4.44% in the last one year (as of 06/06/2023). During this past 52-week period, the fund has traded between $79.22 and $95.97.
ESGU has a beta of 1.02 and standard deviation of 19.12% for the trailing three-year period. With about 321 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard ESG U.S. Stock ETF (ESGV - Free Report) tracks FTSE US ALL CAP CHOICE INDEX and the iShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index. Vanguard ESG U.S. Stock ETF has $6.43 billion in assets, iShares ESG Aware MSCI EAFE ETF has $7.29 billion. ESGV has an expense ratio of 0.09% and ESGD charges 0.20%.
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 Growth.
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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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
Launched on 12/01/2016, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth category of the market.
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.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
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
Because the fund has amassed over $13.75 billion, this makes it the largest ETF in the Style Box - All Cap Growth. ESGU is managed by Blackrock. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for ESGU are 0.15%, which makes it one of the cheaper products in the space.
ESGU's 12-month trailing dividend yield is 1.58%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
ESGU's heaviest allocation is in the Information Technology sector, which is about 29.40% of the portfolio. Its Healthcare and Financials round out the top three.
Taking into account individual holdings, Apple Inc (AAPL - Free Report) accounts for about 7.06% of the fund's total assets, followed by Microsoft Corp (MSFT - Free Report) and Amazon Com Inc (AMZN - Free Report) .
ESGU's top 10 holdings account for about 25.88% of its total assets under management.
Performance and Risk
So far this year, ESGU has added roughly 11.56%, and it's up approximately 4.44% in the last one year (as of 06/06/2023). During this past 52-week period, the fund has traded between $79.22 and $95.97.
ESGU has a beta of 1.02 and standard deviation of 19.12% for the trailing three-year period. With about 321 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard ESG U.S. Stock ETF (ESGV - Free Report) tracks FTSE US ALL CAP CHOICE INDEX and the iShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index. Vanguard ESG U.S. Stock ETF has $6.43 billion in assets, iShares ESG Aware MSCI EAFE ETF has $7.29 billion. ESGV has an expense ratio of 0.09% and ESGD charges 0.20%.
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 Growth.
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.