The iShares U.S. Equity Factor ETF (LRGF) made its debut on 04/28/2015, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $2.01 billion, this makes it one of the largest ETFs in the Style Box - All Cap Value. LRGF is managed by Blackrock. Before fees and expenses, LRGF seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index.
The STOXX U.S. Equity Factor Index composes of U.S. large and mid-capitalization stocks that have favourable exposure to target style factors subject to constraints.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Operating expenses on an annual basis are 0.08% for this ETF, which makes it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.28%.
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.
LRGF's heaviest allocation is in the Information Technology sector, which is about 28.70% of the portfolio. Its Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Microsoft Corp- (MSFT) accounts for about 6.44% of total assets, followed by Nvidia Corp- (NVDA) and Apple Inc- (AAPL).
The top 10 holdings account for about 31.68% of total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Equity Factor ETF has gained about 15.49% so far, and it's up approximately 22.65% over the last 12 months (as of 07/25/2024). LRGF has traded between $41.50 and $57.86 in this past 52-week period.
The fund has a beta of 0.98 and standard deviation of 17.20% for the trailing three-year period, which makes LRGF a medium risk choice in this particular space. With about 292 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares U.S. Equity Factor ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
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 $10.40 billion in assets, iShares Core S&P U.S. Value ETF has $17.94 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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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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