Launched on 05/05/2010, the iShares MSCI USA Equal Weighted ETF (EUSA) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Blend category of the market.
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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
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.
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
EUSA is managed by Blackrock, and this fund has amassed over $341.99 M, which makes it one of the average sized ETFs in the Style Box - All Cap Blend. 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.
Annual operating expenses for EUSA are 0.15%, which makes it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.50%.
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.
EUSA's heaviest allocation is in the Information Technology sector, which is about 15.40% of the portfolio. Its Financials and Industrials round out the top three.
When you look at individual holdings, Global Payments Inc (GPN) accounts for about 0.31% of the fund's total assets, followed by Tiffany (TIF) and Blk Csh Fnd Treasury Sl Agency (XTSLA).
Its top 10 holdings account for approximately 2.26% of EUSA's total assets under management.
Performance and Risk
The ETF has added about 25.10% so far this year and is up roughly 13.97% in the last one year (as of 11/14/2019). In the past 52-week period, it has traded between $47.02 and $61.75.
EUSA has a beta of 1.07 and standard deviation of 12.41% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 641 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 $24.37 B in assets, Vanguard Total Stock Market ETF has $127.30 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.
Click to get this free report iShares MSCI USA Equal Weighted ETF (EUSA): ETF Research Reports Vanguard Total Stock Market ETF (VTI): ETF Research Reports iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports Tiffany & Co. (TIF) : Free Stock Analysis Report Global Payments Inc. (GPN) : Free Stock Analysis Report To read this article on Zacks.com click here.