Designed to provide broad exposure to the Style Box - All Cap Value category of the market, the Vident U.S. Equity Strategy ETF (VUSE) is a smart beta exchange traded fund launched on 01/22/2014.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the 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.
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
The fund is managed by Vident Financial, and has been able to amass over $574.75 million, which makes it one of the larger ETFs in the Style Box - All Cap Value. Before fees and expenses, this particular fund 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
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.
Operating expenses on an annual basis are 0.50% for VUSE, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.97%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Representing 25.60% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Healthcare round out the top three.
When you look at individual holdings, Broadcom Inc (AVGO) accounts for about 2.29% of the fund's total assets, followed by Amazon.com Inc (AMZN) and Exxon Mobil Corp (XOM).
Its top 10 holdings account for approximately 21.25% of VUSE's total assets under management.
Performance and Risk
So far this year, VUSE has gained about 8.43%, and is up roughly 13.65% in the last one year (as of 07/19/2024). During this past 52-week period, the fund has traded between $44.73 and $56.37.
The fund has a beta of 1.10 and standard deviation of 17.75% for the trailing three-year period, which makes VUSE a medium risk choice in this particular space. With about 127 holdings, it effectively diversifies company-specific risk.
Alternatives
Vident U.S. Equity Strategy 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 $18.10 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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Get it free >>Vident U.S. Equity Strategy ETF (VUSE): ETF Research Reports
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : 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.
