Designed to provide broad exposure to the Style Box - All Cap Blend category of the market, the iShares MSCI USA Equal Weighted ETF (EUSA) is a smart beta exchange traded fund launched on 05/05/2010.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
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
Because the fund has amassed over $259.38 M, this makes it one of the average sized ETFs in the Style Box - All Cap Blend. EUSA is managed by Blackrock. EUSA, before fees and expenses, seeks to match the performance of the MSCI USA Equal Weighted Index.
The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.15% for EUSA, making it one of the cheaper products in the space.
EUSA's 12-month trailing dividend yield is 1.73%.
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.
Representing 15.60% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.
Taking into account individual holdings, Anadarko Petroleum Corp (APC) accounts for about 0.26% of the fund's total assets, followed by Qualcomm Inc (QCOM) and Walt Disney (DIS).
The top 10 holdings account for about 2.24% of total assets under management.
Performance and Risk
The ETF return is roughly 16.26% so far this year and was up about 4.30% in the last one year (as of 05/20/2019). In the past 52-week period, it has traded between $47.02 and $59.92.
EUSA has a beta of 1.06 and standard deviation of 12.15% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 625 holdings, it effectively diversifies company-specific risk.
IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $19.75 B in assets, Vanguard Total Stock Market ETF has $112.01 B. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.
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 Blend.
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 Equal Weighted ETF (EUSA): ETF Research Reports
The Walt Disney Company (DIS) : Free Stock Analysis Report
QUALCOMM Incorporated (QCOM) : Free Stock Analysis Report
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
Anadarko Petroleum Corporation (APC) : Free Stock Analysis Report
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