The iShares MSCI USA Multifactor ETF (LRGF) was launched on 04/28/2015, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box – Large Cap Value 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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
Because the fund has amassed over $1.20 billion, this makes it one of the average sized ETFs in the Style Box – Large Cap Value. LRGF is managed by Blackrock. This particular fund seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index before fees and expenses.
The MSCI USA Diversified Multiple-Factor Index is composed of U.S. large and mid-capitalization stocks that have favorable exposure to target style factors subject to constraints.
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.
Annual operating expenses for LRGF are 0.20%, which makes it on par with most peer products in the space.
LRGF’s 12-month trailing dividend yield is 1.12%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
LRGF’s heaviest allocation is in the Information Technology sector, which is about 34.50% of the portfolio. Its Consumer Discretionary and Industrials round out the top three.
When you look at individual holdings, Apple Inc (AAPL) accounts for about 4.08% of the fund’s total assets, followed by Microsoft Corp (MSFT) and Oracle Corp (ORCL).
Its top 10 holdings account for approximately 20.02% of LRGF’s total assets under management.
Performance and Risk
Year-to-date, the iShares MSCI USA Multifactor ETF has lost about -5.93% so far, and was up about 10.07% over the last 12 months (as of 02/16/2022). LRGF has traded between $37.96 and $46.80 in this past 52-week period.
The fund has a beta of 0.99 and standard deviation of 23.09% for the trailing three-year period, which makes LRGF a medium risk choice in this particular space. With about 155 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares MSCI USA Multifactor ETF is a reasonable option for investors seeking to outperform the Style Box – Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $57.52 billion in assets, Vanguard Value ETF has $91.85 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
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 – Large Cap Value.
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
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