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Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the iShares MSCI USA Equal Weighted ETF (EUSA - Free Report) is a smart beta exchange traded fund launched on 05/05/2010.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

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

The fund is sponsored by Blackrock. It has amassed assets over $314.98 M, making it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

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.

Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.

EUSA's 12-month trailing dividend yield is 1.70%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

For EUSA, it has heaviest allocation in the Information Technology sector --about 15.90% of the portfolio --while Financials and Industrials round out the top three.

Looking at individual holdings, Fiserv Inc (FISV - Free Report) accounts for about 0.39% of total assets, followed by Salesforce.com Inc (CRM - Free Report) and L3harris Technologies Inc (LHX - Free Report) .

The top 10 holdings account for about 2.83% of total assets under management.

Performance and Risk

So far this year, EUSA has added roughly 20.03%, and is up about 2.25% in the last one year (as of 09/09/2019). During this past 52-week period, the fund has traded between $47.02 and $60.88.

The fund has a beta of 1.07 and standard deviation of 12.45% for the trailing three-year period, which makes EUSA a medium risk choice in this particular space. With about 642 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $22.49 B in assets, Vanguard Total Stock Market ETF has $118.83 B. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

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 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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