The FlexShares Quality Dividend Defensive ETF (QDEF) made its debut on 12/14/2012, and is a smart beta exchange traded fund that provides 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.
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.
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.
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
QDEF is managed by Flexshares, and this fund has amassed over $399.87 million, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. QDEF seeks to match the performance of the Northern Trust Quality Dividend Defensive Index before fees and expenses.
The Northern Trust Quality Dividend Defensive Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is generally between 0.5 to 1.0 times that of the Northern Trust 1250 Index that are selected based on expected dividend payment and fundamental factors.
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 0.37% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.78%.
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.
QDEF's heaviest allocation is in the Financials sector, which is about 35.50% of the portfolio. Its Information Technology and Healthcare round out the top three.
Taking into account individual holdings, Apple Inc Common Stock Usd 0.00001 (AAPL) accounts for about 6.16% of the fund's total assets, followed by Microsoft Corp Common Stock Usd 0.00000625 (MSFT) and Nvidia Corp Common Stock Usd 0.001 (NVDA).
QDEF's top 10 holdings account for about 35.29% of its total assets under management.
Performance and Risk
So far this year, QDEF has added about 19.98%, and was up about 25.12% in the last one year (as of 09/02/2024). During this past 52-week period, the fund has traded between $52.45 and $70.34.
The fund has a beta of 0.90 and standard deviation of 14.45% for the trailing three-year period, which makes QDEF a medium risk choice in this particular space. With about 140 holdings, it effectively diversifies company-specific risk.
Alternatives
FlexShares Quality Dividend Defensive ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $60.74 billion in assets, Vanguard Total Stock Market ETF has $426.47 billion. 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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Get it free >>FlexShares Quality Dividend Defensive ETF (QDEF): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
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NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
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