A smart beta exchange traded fund, the Vident U.S. Equity Strategy ETF (VUSE) debuted on 01/22/2014, and offers broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
Because the fund has amassed over $508.44 million, this makes it one of the larger ETFs in the Style Box - All Cap Value. VUSE is managed by Vident Financial. VUSE, before fees and expenses, seeks to match the performance of the Vident Core U.S. Equity Fund Index.
The Vident U.S. Quality Index is a rules-based, systematic strategy index comprised of equity securities principally traded in the U.S. market of issuers domiciled in the United States.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for VUSE are 0.50%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.43%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
This ETF has heaviest allocation in the Information Technology sector - about 25.40% of the portfolio. Financials and Healthcare round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 2.52% of the fund's total assets, followed by Walmart Inc (WMT) and Merck & Co Inc (MRK).
VUSE's top 10 holdings account for about 22.26% of its total assets under management.
Performance and Risk
The ETF has added about 12.85% so far this year and it's up approximately 14.91% in the last one year (as of 11/10/2023). In the past 52-week period, it has traded between $41.06 and $49.18.
The ETF has a beta of 1.14 and standard deviation of 19.49% for the trailing three-year period, making it a medium risk choice in the space. With about 125 holdings, it effectively diversifies company-specific risk.
Alternatives
Vident U.S. Equity Strategy ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
Dimensional U.S. Targeted Value ETF (DFAT) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $7.92 billion in assets, iShares Core S&P U.S. Value ETF has $13.60 billion. DFAT has an expense ratio of 0.28% and IUSV charges 0.04%.
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 Value.
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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Free: See Our Top Stock and 4 Runners Up >>Vident U.S. Equity Strategy ETF (VUSE): ETF Research Reports
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Merck & Co., Inc. (MRK) : Free Stock Analysis Report
Walmart Inc. (WMT) : Free Stock Analysis Report
iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports
Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
