The iShares U.S. Equity Factor ETF (LRGF) was launched on 04/28/2015, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Value category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
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.
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
Managed by Blackrock, LRGF has amassed assets over $2.36 billion, making it one of the largest ETFs in the Style Box - All Cap Value. Before fees and expenses, this particular fund 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
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 LRGF are 0.08%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.17%.
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.
For LRGF, it has heaviest allocation in the Information Technology sector --about 33.30% of the portfolio --while Consumer Discretionary and Financials round out the top three.
Taking into account individual holdings, Nvidia Corp (NVDA) accounts for about 6.45% of the fund's total assets, followed by Apple Inc (AAPL) and Microsoft Corp (MSFT).
Its top 10 holdings account for approximately 31.47% of LRGF's total assets under management.
Performance and Risk
Year-to-date, the iShares U.S. Equity Factor ETF return is roughly 30.62% so far, and was up about 38% over the last 12 months (as of 11/27/2024). LRGF has traded between $45.82 and $62.54 in this past 52-week period.
LRGF has a beta of 0.98 and standard deviation of 17.53% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 282 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares U.S. Equity Factor 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.
Capital Group Dividend Value ETF (CGDV) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Capital Group Dividend Value ETF has $12.02 billion in assets, iShares Core S&P U.S. Value ETF has $20.38 billion. CGDV has an expense ratio of 0.33% 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
Capital Group Dividend Value ETF (CGDV): ETF Research Reports
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