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Is iShares MSCI Intl SmallCap Multifactor ETF (ISCF) a Strong ETF Right Now?

Smart Beta ETF report for ISCF

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This story originally appeared on Zacks

Designed to provide broad exposure to the Broad Developed World ETFs category of the market, the iShares MSCI Intl SmallCap Multifactor ETF (ISCF) is a smart beta exchange traded fund launched on 04/28/2015.

- Zacks

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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is managed by Blackrock. ISCF has been able to amass assets over $205.84 million, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund, before fees and expenses, seeks to match the performance of the MSCI World exUSA Small Cap Diversified Multiple-Factor Index.

The MSCI World exUSA Small Cap Diversified Multiple-Factor Index is designed to select equity securities from MSCI World ex USA Small Cap Index that have high exposure to four investment style factors: value, quality, momentum and low size.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for ISCF are 0.40%, which makes it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 4.02%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Tourmaline Oil Corp (TOU) accounts for about 1.50% of the fund's total assets, followed by Getinge B (GETI) and Tecan Group Ag (TECN).

ISCF's top 10 holdings account for about 9.17% of its total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI Intl SmallCap Multifactor ETF return is roughly 10.11% so far, and is up about 13.41% over the last 12 months (as of 12/23/2021). ISCF has traded between $33.15 and $38.87 in this past 52-week period.

The fund has a beta of 0.96 and standard deviation of 20.69% for the trailing three-year period, which makes ISCF a medium risk choice in this particular space. With about 791 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI Intl SmallCap Multifactor ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Total International Stock ETF (VXUS) tracks FTSE Global All Cap ex US Index and the Vanguard FTSE Developed Markets ETF (VEA) tracks FTSE Developed All Cap ex US Index. Vanguard Total International Stock ETF has $50.75 billion in assets, Vanguard FTSE Developed Markets ETF has $105.25 billion. VXUS has an expense ratio of 0.08% and VEA charges 0.05%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

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 Intl SmallCap Multifactor ETF (ISCF): ETF Research Reports

 

Vanguard FTSE Developed Markets ETF (VEA): ETF Research Reports

 

Vanguard Total International Stock ETF (VXUS): ETF Research Reports

 

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