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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
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A smart beta exchange traded fund, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) debuted on 12/01/2016, and offers broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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
The fund is managed by Blackrock, and has been able to amass over $12.93 billion, which makes it one of the largest ETFs in the Style Box - All Cap Growth. Before fees and expenses, ESGU seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for ESGU are 0.15%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.14%.
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.
ESGU's heaviest allocation is in the Information Technology sector, which is about 31.80% of the portfolio. Its Healthcare and Financials round out the top three.
Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.70% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Nvidia Corp (NVDA - Free Report) .
The top 10 holdings account for about 32.09% of total assets under management.
Performance and Risk
So far this year, ESGU return is roughly 18.66%, and it's up approximately 26.11% in the last one year (as of 09/02/2024). During this past 52-week period, the fund has traded between $89.99 and $124.07.
ESGU has a beta of 1.02 and standard deviation of 17.92% for the trailing three-year period. With about 281 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard ESG U.S. Stock ETF (ESGV - Free Report) tracks FTSE US ALL CAP CHOICE INDEX and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ - Free Report) tracks ----------------------------------------. Vanguard ESG U.S. Stock ETF has $9.21 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $15.83 billion. ESGV has an expense ratio of 0.09% 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 Growth.
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 ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
A smart beta exchange traded fund, the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) debuted on 12/01/2016, and offers broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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
The fund is managed by Blackrock, and has been able to amass over $12.93 billion, which makes it one of the largest ETFs in the Style Box - All Cap Growth. Before fees and expenses, ESGU seeks to match the performance of the MSCI USA ESG Focus Index.
The MSCI USA Extended ESG Focus Index comprises of U.S. companies that have positive environmental, social and governance characteristics while exhibiting risk and return characteristics similar to those of the parent index.
Cost & Other Expenses
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for ESGU are 0.15%, which makes it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.14%.
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.
ESGU's heaviest allocation is in the Information Technology sector, which is about 31.80% of the portfolio. Its Healthcare and Financials round out the top three.
Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.70% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Nvidia Corp (NVDA - Free Report) .
The top 10 holdings account for about 32.09% of total assets under management.
Performance and Risk
So far this year, ESGU return is roughly 18.66%, and it's up approximately 26.11% in the last one year (as of 09/02/2024). During this past 52-week period, the fund has traded between $89.99 and $124.07.
ESGU has a beta of 1.02 and standard deviation of 17.92% for the trailing three-year period. With about 281 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares ESG Aware MSCI USA ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
Vanguard ESG U.S. Stock ETF (ESGV - Free Report) tracks FTSE US ALL CAP CHOICE INDEX and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ - Free Report) tracks ----------------------------------------. Vanguard ESG U.S. Stock ETF has $9.21 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $15.83 billion. ESGV has an expense ratio of 0.09% 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 Growth.
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.