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A smart beta exchange traded fund, the iShares Core S&P U.S. Value ETF (IUSV) debuted on 07/24/2000, and offers 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.
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.
There are some investors, though, who think it’s possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
IUSV is managed by Blackrock, and this fund has amassed over $12.77 billion, which makes it the largest ETF in the Style Box – All Cap Value. This particular fund, before fees and expenses, seeks to match the performance of the S&P 900 Value Index.
The S&P 900 Value Index measures the performance of the large and mid-capitalization value sector of the U.S. equity market.
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 0.04% for IUSV, making it the least expensive product in the space.
It’s 12-month trailing dividend yield comes in at 2.18%.
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.
IUSV’s heaviest allocation is in the Financials sector, which is about 18.60% of the portfolio. Its Information Technology and Industrials round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 4.28% of the fund’s total assets, followed by Berkshire Hathaway Inc Class B (BRK.B) and Amazon Com Inc (AMZN).
Performance and Risk
The ETF has added about 1.67% so far this year and is down about -1.32% in the last one year (as of 03/17/2023). In the past 52-week period, it has traded between $62.61 and $77.86.
IUSV has a beta of 0.96 and standard deviation of 20.91% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 712 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Core S&P U.S. Value 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.
Capital Group Dividend Value ETF (CGDV) tracks —————————————- and the Dimensional U.S. Targeted Value ETF (DFAT) tracks —————————————-. Capital Group Dividend Value ETF has $1.75 billion in assets, Dimensional U.S. Targeted Value ETF has $7.49 billion. CGDV has an expense ratio of 0.33% and DFAT charges 0.29%.
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
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
Dimensional U.S. Targeted Value ETF (DFAT): ETF Research Reports
Capital Group Dividend Value ETF (CGDV): 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.
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