Designed to provide broad exposure to the Style Box – All Cap Value category of the market, the iShares U.S. Equity Factor ETF (LRGF) is a smart beta exchange traded fund launched on 04/28/2015.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option 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.
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.
Even though this space provides many choices to investors–think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting–not all have been able to deliver first-rate results.
Fund Sponsor & Index
LRGF is managed by Blackrock, and this fund has amassed over $1.15 billion, which makes it one of the largest ETFs in the Style Box – All Cap Value. This particular fund seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index before fees and expenses.
The STOXX U.S. Equity Factor Index composes of U.S. large and mid-capitalization stocks that have favourable exposure to target style factors subject to constraints.
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 0.08% for this ETF, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.78%.
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.
LRGF’s heaviest allocation is in the Information Technology sector, which is about 27.20% of the portfolio. Its Healthcare and Financials round out the top three.
Looking at individual holdings, Apple Inc (AAPL) accounts for about 6.62% of total assets, followed by Microsoft Corp (MSFT) and Amazon Com Inc (AMZN).
Its top 10 holdings account for approximately 23.12% of LRGF’s total assets under management.
Performance and Risk
The ETF has lost about -14.47% so far this year and is down about -13.09% in the last one year (as of 12/27/2022). In the past 52-week period, it has traded between $36.22 and $46.80.
LRGF has a beta of 0.97 and standard deviation of 25.66% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 311 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares U.S. Equity Factor ETF is an excellent option for investors seeking to outperform the Style Box – All Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
Dimensional U.S. Targeted Value ETF (DFAT) tracks —————————————- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Dimensional U.S. Targeted Value ETF has $7.32 billion in assets, iShares Core S&P U.S. Value ETF has $12.67 billion. DFAT has an expense ratio of 0.29% and IUSV 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 – All 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
Zacks ETF Center
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