The SPDR MSCI EAFE StrategicFactors ETF (QEFA) was launched on 06/04/2014, and is a smart beta exchange traded fund designed to offer broad exposure to the Broad Developed World ETFs 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
The fund is sponsored by State Street Global Advisors. It has amassed assets over $955.39 million, making it one of the average sized ETFs in the Broad Developed World ETFs. QEFA seeks to match the performance of the MSCI EAFE Factor Mix A-Series Index before fees and expenses.
The MSCI EAFE Factor Mix A-Series Index captures large and mid-cap representation across 22 developed market Europe, Australasia, and Far East countries and aims to represent the performance of value, low volatility, and quality factor strategies.
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.
Annual operating expenses for this ETF are 0.30%, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.82%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Nestle Sa Reg (NESN) accounts for about 2.28% of the fund's total assets, followed by Novo Nordisk A/s B (NOVOB) and Asml Holding Nv (ASML).
The top 10 holdings account for about 16.88% of total assets under management.
Performance and Risk
The ETF has added about 7.11% and it's up approximately 11.10% so far this year and in the past one year (as of 07/16/2024), respectively. QEFA has traded between $64.42 and $78 during this last 52-week period.
QEFA has a beta of 0.79 and standard deviation of 15.05% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 690 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR MSCI EAFE StrategicFactors ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares MSCI EAFE ETF (EFA) tracks MSCI EAFE Index and the iShares Core MSCI EAFE ETF (IEFA) tracks MSCI EAFE Investable Market Index. IShares MSCI EAFE ETF has $55.04 billion in assets, iShares Core MSCI EAFE ETF has $120.69 billion. EFA has an expense ratio of 0.33% and IEFA charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.
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.
SPDR MSCI EAFE StrategicFactors ETF (QEFA): ETF Research Reports
ASML Holding N.V. (ASML) : Free Stock Analysis Report
iShares MSCI EAFE ETF (EFA): ETF Research Reports
iShares Core MSCI EAFE ETF (IEFA): ETF Research Reports
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
