Making its debut on 05/05/2010, smart beta exchange traded fund iShares MSCI USA Equal Weighted ETF (EUSA - Free Report) provides investors broad exposure to the Style Box - All Cap Blend 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
The fund is sponsored by Blackrock. It has amassed assets over $361.09 M, making it one of the average sized ETFs in the Style Box - All Cap Blend. Before fees and expenses, EUSA 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
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 this ETF are 0.15%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.56%.
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.
For EUSA, it has heaviest allocation in the Information Technology sector --about 16.20% of the portfolio --while Financials and Industrials round out the top three.
Looking at individual holdings, Bristol Myers Squibb (BMY - Free Report) accounts for about 0.24% of total assets, followed by Alnylam Pharmaceuticals Inc (ALNY - Free Report) and Splunk Inc (SPLK - Free Report) .
Its top 10 holdings account for approximately 1.91% of EUSA's total assets under management.
Performance and Risk
The ETF return is roughly 30.33% and is up about 30.49% so far this year and in the past one year (as of 12/30/2019), respectively. EUSA has traded between $48.97 and $63.96 during this last 52-week period.
The fund has a beta of 1.07 and standard deviation of 12.38% for the trailing three-year period, which makes EUSA a medium risk choice in this particular space. With about 646 holdings, it effectively diversifies company-specific risk.
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 $25.21 B in assets, Vanguard Total Stock Market ETF has $136.74 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.
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.