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Is iShares ESG Aware MSCI USA ETF (ESGU) a Strong ETF Right Now?
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The iShares ESG Aware MSCI USA ETF (ESGU - Free Report) was launched on 12/01/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
ESGU is managed by Blackrock, and this fund has amassed over $13.52 billion, which makes it one of the largest ETFs in the Style Box - All Cap Growth. This particular fund, before fees and expenses, 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
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.
Operating expenses on an annual basis are 0.15% for ESGU, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.15%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 32.20% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.58% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Nvidia Corp (NVDA - Free Report) .
The top 10 holdings account for about 32.32% of total assets under management.
Performance and Risk
So far this year, ESGU has added about 21.83%, and is up about 34.40% in the last one year (as of 11/06/2024). During this past 52-week period, the fund has traded between $95.18 and $128.46.
The ETF has a beta of 1.02 and standard deviation of 17.95% for the trailing three-year period. With about 289 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 $9.63 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $17.94 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?
The iShares ESG Aware MSCI USA ETF (ESGU - Free Report) was launched on 12/01/2016, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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
ESGU is managed by Blackrock, and this fund has amassed over $13.52 billion, which makes it one of the largest ETFs in the Style Box - All Cap Growth. This particular fund, before fees and expenses, 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
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.
Operating expenses on an annual basis are 0.15% for ESGU, making it one of the least expensive products in the space.
The fund has a 12-month trailing dividend yield of 1.15%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 32.20% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Healthcare round out the top three.
Looking at individual holdings, Apple Inc (AAPL - Free Report) accounts for about 6.58% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Nvidia Corp (NVDA - Free Report) .
The top 10 holdings account for about 32.32% of total assets under management.
Performance and Risk
So far this year, ESGU has added about 21.83%, and is up about 34.40% in the last one year (as of 11/06/2024). During this past 52-week period, the fund has traded between $95.18 and $128.46.
The ETF has a beta of 1.02 and standard deviation of 17.95% for the trailing three-year period. With about 289 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 $9.63 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $17.94 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.