Making its debut on 12/28/2015, smart beta exchange traded fund Franklin U.S. Low Volatility High Dividend Index ETF (
LVHD Quick Quote LVHD - Free Report) provides investors broad exposure to the Style Box - Large Cap Value 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
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
LVHD is managed by Franklin Templeton Investments, and this fund has amassed over $835.87 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, LVHD seeks to match the performance of the QS Low Volatility High Dividend Index.
The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Annual operating expenses for this ETF are 0.27%, making it on par with most peer products in the space.
LVHD's 12-month trailing dividend yield is 3.97%.
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.
For LVHD, it has heaviest allocation in the Utilities sector --about 22.10% of the portfolio --while Consumer Staples and Industrials round out the top three.
When you look at individual holdings, Cisco Systems Inc (
CSCO Quick Quote CSCO - Free Report) accounts for about 3.12% of the fund's total assets, followed by 3m Co ( MMM Quick Quote MMM - Free Report) and Verizon Communications In ( VZ Quick Quote VZ - Free Report) .
Its top 10 holdings account for approximately 26.43% of LVHD's total assets under management.
Performance and Risk
The ETF has lost about -6.42% and is down about -6.41% so far this year and in the past one year (as of 11/23/2023), respectively. LVHD has traded between $32.68 and $39.17 during this last 52-week period.
LVHD has a beta of 0.79 and standard deviation of 13.62% for the trailing three-year period. With about 128 holdings, it effectively diversifies company-specific risk.
Franklin U.S. Low Volatility High Dividend Index ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (
IWD Quick Quote IWD - Free Report) tracks Russell 1000 Value Index and the Vanguard Value ETF ( VTV Quick Quote VTV - Free Report) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $50.41 billion in assets, Vanguard Value ETF has $99.92 billion. IWD has an expense ratio of 0.19% and VTV 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 - Large 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.