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Is iShares MSCI USA Multifactor ETF (LRGF) a Strong ETF Right Now?

Smart Beta ETF report for LRGF

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This story originally appeared on Zacks

A smart beta exchange traded fund, the iShares MSCI USA Multifactor ETF (LRGF) debuted on 04/28/2015, and offers broad exposure to the Style Box - Large Cap Value category of the market.

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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.

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.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

LRGF is managed by Blackrock, and this fund has amassed over $1.18 billion, which makes it one of the average sized ETFs in the Style Box - Large Cap Value. This particular fund seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index before fees and expenses.

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

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.

With on par with most peer products in the space, this ETF has annual operating expenses of 0.20%.

LRGF's 12-month trailing dividend yield is 1%.

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.

For LRGF, it has heaviest allocation in the Information Technology sector --about 32.70% of the portfolio --while Consumer Discretionary and Industrials round out the top three.

Looking at individual holdings, Apple Inc (AAPL) accounts for about 3.95% of total assets, followed by Microsoft Corp (MSFT) and Target Corp (TGT).

Its top 10 holdings account for approximately 25.5% of LRGF's total assets under management.

Performance and Risk

So far this year, LRGF has added about 15.57%, and was up about 24.02% in the last one year (as of 10/12/2021). During this past 52-week period, the fund has traded between $32.84 and $45.10.

The ETF has a beta of 0.99 and standard deviation of 23.59% for the trailing three-year period, making it a medium risk choice in the space. With about 155 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Multifactor ETF is an excellent option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

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 $54.24 billion in assets, Vanguard Value ETF has $83.23 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.

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 MSCI USA Multifactor ETF (LRGF): ETF Research Reports

 

Apple Inc. (AAPL): Free Stock Analysis Report

 

Microsoft Corporation (MSFT): Free Stock Analysis Report

 

Target Corporation (TGT): Free Stock Analysis Report

 

Vanguard Value ETF (VTV): ETF Research Reports

 

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

 

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Zacks Investment Research