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Is iShares Paris-Aligned Climate MSCI USA ETF (PABU) a Strong ETF Right Now?
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Making its debut on 04/08/2022, smart beta exchange traded fund iShares Paris-Aligned Climate MSCI USA ETF (PABU - Free Report) provides investors 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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
The fund is sponsored by Blackrock. It has amassed assets over $1.94 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund 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
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 PABU are 0.10%, which makes it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.94%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PABU, it has heaviest allocation in the Information Technology sector --about 33.40% of the portfolio --while Healthcare and Financials round out the top three.
Looking at individual holdings, Microsoft Corp- (MSFT - Free Report) accounts for about 7.52% of total assets, followed by Nvidia Corp- (NVDA - Free Report) and Apple Inc- (AAPL - Free Report) .
The top 10 holdings account for about 37.5% of total assets under management.
Performance and Risk
The ETF has added about 17.46% so far this year and is up roughly 27.53% in the last one year (as of 07/11/2024). In the past 52-week period, it has traded between $44.68 and $61.60.
The fund has a beta of 1.04 and standard deviation of 18.90% for the trailing three-year period. With about 244 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 USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ - Free Report) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $13.18 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $15.38 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
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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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 - Free Report) provides investors 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
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
The fund is sponsored by Blackrock. It has amassed assets over $1.94 billion, making it one of the larger ETFs in the Style Box - All Cap Blend. Before fees and expenses, this particular fund 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
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 PABU are 0.10%, which makes it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.94%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
For PABU, it has heaviest allocation in the Information Technology sector --about 33.40% of the portfolio --while Healthcare and Financials round out the top three.
Looking at individual holdings, Microsoft Corp- (MSFT - Free Report) accounts for about 7.52% of total assets, followed by Nvidia Corp- (NVDA - Free Report) and Apple Inc- (AAPL - Free Report) .
The top 10 holdings account for about 37.5% of total assets under management.
Performance and Risk
The ETF has added about 17.46% so far this year and is up roughly 27.53% in the last one year (as of 07/11/2024). In the past 52-week period, it has traded between $44.68 and $61.60.
The fund has a beta of 1.04 and standard deviation of 18.90% for the trailing three-year period. With about 244 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 USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ - Free Report) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $13.18 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $15.38 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
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.