Making its debut on 04/28/2015, smart beta exchange traded fund iShares MSCI USA Multifactor ETF (LRGF) provides investors broad exposure to the Style Box – Large 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.
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.
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.
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 Blackrock. It has amassed assets over $794.13 million, making it one of the average sized ETFs in the Style Box – Large Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index.
The MSCI USA Diversified Multiple-Factor Index is composed of U.S. large and mid-capitalization stocks that have favourable exposure to target style factors subject to constraints.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.
Operating expenses on an annual basis are 0.20% for this ETF, which makes it on par with most peer products in the space.
LRGF’s 12-month trailing dividend yield is 1.77%.
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% of the portfolio. Its Healthcare and Industrials round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 4.47% of the fund’s total assets, followed by Target Corp (TGT) and Walmart Inc (WMT).
LRGF’s top 10 holdings account for about 26.98% of its total assets under management.
Performance and Risk
The ETF has lost about -3.06% so far this year and was up about 5.71% in the last one year (as of 09/30/2020). In the past 52-week period, it has traded between $22.90 and $35.80.
The fund has a beta of 1 and standard deviation of 23.20% for the trailing three-year period, which makes LRGF a medium risk choice in this particular space. With about 148 holdings, it effectively diversifies company-specific risk.
IShares MSCI USA Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box – Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $36 billion in assets, Vanguard Value ETF has $49.77 billion. IWD has an expense ratio of 0.19% and VTV 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 – Large Cap Value.
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 MSCI USA Multifactor ETF (LRGF): ETF Research Reports
Target Corporation (TGT): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Walmart Inc. (WMT): Free Stock Analysis Report
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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