The FlexShares Quality Dividend Defensive Index Fund (QDEF) was launched on 12/14/2012, and is a smart beta exchange traded fund designed to offer broad exposure to the Total Market (U.S.) ETFs category of the U.S. equity 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
The fund is managed by Flexshares, and has been able to amass over $302.89 M, which makes it one of the average sized ETFs in the Total Market (U.S.) ETFs. This particular fund seeks to match the performance of the Northern Trust Quality Dividend Defensive Index before fees and expenses.
The Northern Trust Quality Dividend Defensive Index is designed to provide exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is generally between 0.5 to 1.0 times that of the Northern Trust 1250 Index that are selected based on expected dividend payment and fundamental factors.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.37% for this ETF, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 2.72%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 21.60% of the portfolio. Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Boeing Co/the Ba (BA) accounts for about 3.42% of the fund's total assets, followed by Pfizer Inc Pfe (PFE) and Exxon Mobil Corp Xom (XOM).
Its top 10 holdings account for approximately 28.01% of QDEF's total assets under management.
Performance and Risk
QDEF has lost about -1.52% so far this year, and as of 04/26/2018, is up roughly 9.45% in the last one year. In the past 52-week period, the fund has traded between $39.50 and $46.52.
The ETF has a beta of 0.89 and standard deviation of 11.92% for the trailing three-year period, making it a medium choice in the space. With about 153 holdings, it effectively diversifies company-specific risk.
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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Pfizer Inc. (PFE) : Free Stock Analysis Report
The Boeing Company (BA) : Free Stock Analysis Report
Exxon Mobil Corporation (XOM) : Free Stock Analysis Report
FLEXS-Q DIV DEF (QDEF): ETF Research Reports
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