Is John Hancock Multifactor Small Cap ETF (JHSC) a Strong ETF Right Now?

The John Hancock Multifactor Small Cap ETF (JHSC) was launched on 11/08/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small 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.

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.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

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

JHSC is managed by John Hancock, and this fund has amassed over $428.74 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund seeks to match the performance of the JOHN HANCOCK DIMENSIONAL SMALL CAP INDEX before fees and expenses.

The John Hancock Dimensional Small Cap Index is designed to comprise a subset of securities in the U.S. Universe issued by companies whose market capitalizations are smaller than the 750th largest U.S. company but excluding the smallest 4% of U.S. companies at the time of reconstitution.

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 JHSC are 0.42%, which makes it one of the more expensive products in the space.

It has a 12-month trailing dividend yield of 0.95%.

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.

This ETF has heaviest allocation in the Industrials sector - about 21.50% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Crocs Inc (CROX) accounts for about 0.66% of total assets, followed by Nov Inc (NOV) and Cognex Corp (CGNX).

JHSC's top 10 holdings account for about 6.01% of its total assets under management.

Performance and Risk

The ETF return is roughly 2.57% and was up about 20.92% so far this year and in the past one year (as of 05/28/2024), respectively. JHSC has traded between $29.77 and $38.52 during this last 52-week period.

JHSC has a beta of 1.13 and standard deviation of 20.29% for the trailing three-year period. With about 271 holdings, it effectively diversifies company-specific risk.

Alternatives

John Hancock Multifactor Small Cap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $60.50 billion in assets, iShares Core S&P Small-Cap ETF has $78.85 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 - Small 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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John Hancock Multifactor Small Cap ETF (JHSC): ETF Research Reports

NOV Inc. (NOV) : Free Stock Analysis Report

Cognex Corporation (CGNX) : Free Stock Analysis Report

Crocs, Inc. (CROX) : Free Stock Analysis Report

iShares Russell 2000 ETF (IWM): ETF Research Reports

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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