Making its debut on 06/29/2017, smart beta exchange traded fund WisdomTree U.S. Multifactor ETF (USMF) provides investors broad exposure to the Style Box - All Cap Blend 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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
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.
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 managed by Wisdomtree, and has been able to amass over $309 million, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the WisdomTree U.S. Multifactor Index.
The WisdomTree U.S. Multifactor Index is comprised of 200 U.S. companies with the highest composite scores based on two fundamental factors, value and quality measures, and two technical factors, momentum and correlation.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.28%.
It has a 12-month trailing dividend yield of 1.27%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 30.80% 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, Motorola Solutions Inc (MSI) accounts for about 1.51% of the fund's total assets, followed by Roper Technologies Inc (ROP) and Verisign Inc (VRSN).
The top 10 holdings account for about 13.52% of total assets under management.
Performance and Risk
Year-to-date, the WisdomTree U.S. Multifactor ETF has gained about 13.23% so far, and is up about 23.39% over the last 12 months (as of 08/19/2024). USMF has traded between $36.99 and $47.33 in this past 52-week period.
The fund has a beta of 0.89 and standard deviation of 14.70% for the trailing three-year period. With about 201 holdings, it effectively diversifies company-specific risk.
Alternatives
WisdomTree U.S. Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $59.42 billion in assets, Vanguard Total Stock Market ETF has $419.90 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
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 Blend.
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 >>WisdomTree U.S. Multifactor ETF (USMF): ETF Research Reports
VeriSign, Inc. (VRSN) : Free Stock Analysis Report
Roper Technologies, Inc. (ROP) : Free Stock Analysis Report
Motorola Solutions, Inc. (MSI) : Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): 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.
