Is iShares Paris-Aligned Climate MSCI USA ETF (PABU) a Strong ETF Right Now?
The iShares Paris-Aligned Climate MSCI USA ETF (PABU) was launched on 04/08/2022, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Blend category of the market.
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 work great for investors who believe in market efficiency. They provide 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.
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.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
PABU is managed by Blackrock, and this fund has amassed over $1.33 billion, which makes it one of the larger ETFs in the Style Box - All Cap Blend. PABU seeks to match the performance of the MSCI USA CLMT PARIS ALGN BNC EXT SLCT ID before fees and expenses.
The MSCI USA Climate Paris Aligned Benchmark Extended Select Index composed of U.S. large & mid-capitalization stocks designed to be compatible with the objectives of the Paris Agreement by following a decarbonization trajectory, reducing exposure to climate-related transition & physical risks & increasing exposure to companies favourably positioned for the transition to a low-carbon economy.
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 0.10% for PABU, making it one of the least expensive products in the space.
It's 12-month trailing dividend yield comes in at 1.21%.
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.
This ETF has heaviest allocation in the Information Technology sector - about 33% of the portfolio. Healthcare and Financials round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 8.68% of total assets, followed by Microsoft Corp (MSFT) and Nvidia Corp (NVDA).
PABU's top 10 holdings account for about 36.03% of its total assets under management.
Performance and Risk
So far this year, PABU has added about 9.57%, and was up about 9.87% in the last one year (as of 10/30/2023). During this past 52-week period, the fund has traded between $39.83 and $50.65.
The fund has a beta of 1.02 and standard deviation of 21.46% for the trailing three-year period. With about 273 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares Paris-Aligned Climate MSCI USA ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. There are other ETFs in the space which investors could consider as well.
IShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $6.67 billion in assets, iShares ESG Aware MSCI USA ETF has $11.58 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.
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.
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 Paris-Aligned Climate MSCI USA ETF (PABU): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
