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Is John Hancock Multifactor Small Cap ETF (JHSC) a Strong ETF Right Now?

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Launched on 11/08/2017, the John Hancock Multifactor Small Cap ETF (JHSC - Free Report) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Blend 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.

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.

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.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is managed by John Hancock, and has been able to amass over $496.42 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. JHSC, before fees and expenses, seeks to match the performance of the JOHN HANCOCK DIMENSIONAL SMALL CAP INDEX.

The John Hancock Dimensional Small Cap Index is designed to comprise a subset of securities in the U.S. Universe issued by companies whose market capitalizations are smaller than the 750th largest U.S. company but excluding the smallest 4% of U.S. companies at the time of reconstitution.

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 0.42% for JHSC, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.89%.

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.

This ETF has heaviest allocation in the Industrials sector - about 21.30% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Sprouts Farmers Market Inc (SFM - Free Report) accounts for about 0.85% of total assets, followed by Generac Holdings Inc (GNRC - Free Report) and Western Alliance Bancorp (WAL - Free Report) .

Its top 10 holdings account for approximately 6.82% of JHSC's total assets under management.

Performance and Risk

The ETF return is roughly 8.73% and was up about 24.27% so far this year and in the past one year (as of 10/02/2024), respectively. JHSC has traded between $29.77 and $40.14 during this last 52-week period.

JHSC has a beta of 1.11 and standard deviation of 20.51% for the trailing three-year period. With about 283 holdings, it effectively diversifies company-specific risk.

Alternatives

John Hancock Multifactor Small Cap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 ETF (IWM - Free Report) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $68.39 billion in assets, iShares Core S&P Small-Cap ETF has $84.91 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 - Small 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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