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Is FlexShares STOXX US ESG Select Index Fund (ESG) a Strong ETF Right Now?
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Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the FlexShares STOXX US ESG Select Index Fund (ESG - Free Report) is a smart beta exchange traded fund launched on 07/13/2016.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
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
The fund is sponsored by Flexshares. It has amassed assets over $202.56 million, making it one of the average sized ETFs in the Style Box - Large Cap Blend. ESG seeks to match the performance of the STOXX USA ESG Impact Index before fees and expenses.
The STOXX USA ESG Select KPIs Index is an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of environmental, social and governance characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX USA 900 Index.
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 this ETF are 0.32%, making it on par with most peer products in the space.
ESG's 12-month trailing dividend yield is 1.05%.
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 26.90% of the portfolio. Financials and Healthcare round out the top three.
Taking into account individual holdings, Meta Platforms Inc Common Stock Usd 0.000006 (META - Free Report) accounts for about 5.86% of the fund's total assets, followed by Amazon.com Inc Common Stock Usd 0.01 (AMZN - Free Report) and Microsoft Corp Common Stock Usd 0.00000625 (MSFT - Free Report) .
ESG's top 10 holdings account for about 34.12% of its total assets under management.
Performance and Risk
The ETF has gained about 9.32% so far this year and is up roughly 28.10% in the last one year (as of 05/17/2024). In the past 52-week period, it has traded between $100.15 and $126.60.
ESG has a beta of 1.03 and standard deviation of 17.46% for the trailing three-year period. With about 266 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares STOXX US ESG Select Index Fund is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ - Free Report) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $13 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $13.23 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
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 Blend.
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 FlexShares STOXX US ESG Select Index Fund (ESG) a Strong ETF Right Now?
Designed to provide broad exposure to the Style Box - Large Cap Blend category of the market, the FlexShares STOXX US ESG Select Index Fund (ESG - Free Report) is a smart beta exchange traded fund launched on 07/13/2016.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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.
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
The fund is sponsored by Flexshares. It has amassed assets over $202.56 million, making it one of the average sized ETFs in the Style Box - Large Cap Blend. ESG seeks to match the performance of the STOXX USA ESG Impact Index before fees and expenses.
The STOXX USA ESG Select KPIs Index is an optimized index designed to provide broad market exposure that is tilted toward U.S. companies that score better with respect to a small set of environmental, social and governance characteristics and to provide the potential for attractive risk-adjusted performance relative to the STOXX USA 900 Index.
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 this ETF are 0.32%, making it on par with most peer products in the space.
ESG's 12-month trailing dividend yield is 1.05%.
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 26.90% of the portfolio. Financials and Healthcare round out the top three.
Taking into account individual holdings, Meta Platforms Inc Common Stock Usd 0.000006 (META - Free Report) accounts for about 5.86% of the fund's total assets, followed by Amazon.com Inc Common Stock Usd 0.01 (AMZN - Free Report) and Microsoft Corp Common Stock Usd 0.00000625 (MSFT - Free Report) .
ESG's top 10 holdings account for about 34.12% of its total assets under management.
Performance and Risk
The ETF has gained about 9.32% so far this year and is up roughly 28.10% in the last one year (as of 05/17/2024). In the past 52-week period, it has traded between $100.15 and $126.60.
ESG has a beta of 1.03 and standard deviation of 17.46% for the trailing three-year period. With about 266 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares STOXX US ESG Select Index Fund is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ - Free Report) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $13 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $13.23 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
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 Blend.
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.