Is iShares Paris-Aligned Climate MSCI USA ETF (PABU) a Strong ETF Right Now?
Making its debut on 04/08/2022, smart beta exchange traded fund iShares Paris-Aligned Climate MSCI USA ETF (PABU) provides investors broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
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.
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
Managed by Blackrock, PABU has amassed assets over $1.50 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. PABU, before fees and expenses, seeks to match the performance of the MSCI USA CLMT PARIS ALGN BNC EXT SLCT ID.
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
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.
With one of the least expensive products in the space, this ETF has annual operating expenses of 0.10%.
It has a 12-month trailing dividend yield of 1.09%.
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.
Representing 32.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Financials round out the top three.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 8.64% of the fund's total assets, followed by Microsoft Corp (MSFT) and Amazon Com Inc (AMZN).
PABU's top 10 holdings account for about 30.65% of its total assets under management.
Performance and Risk
The ETF has gained about 17.01% so far this year and is up roughly 15.94% in the last one year (as of 06/26/2023). In the past 52-week period, it has traded between $38.63 and $48.76.
The fund has a beta of 1.01 and standard deviation of 23.37% for the trailing three-year period. With about 309 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 $7.25 billion in assets, iShares ESG Aware MSCI USA ETF has $14.09 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
Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Apple Inc. (AAPL) : Free Stock Analysis Report
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iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
