Making its debut on 04/15/2015, smart beta exchange traded fund SPDR MSCI USA StrategicFactors ETF (QUS) provides investors broad exposure to the Style Box – Large 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.
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.
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
QUS is managed by State Street Global Advisors, and this fund has amassed over $1.24 billion, which makes it one of the larger ETFs in the Style Box – Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA Factor Mix A-Series Index.
The MSCI USA Factor Mix A-Series Index measures the equity market performance of large and mid-cap companies across the U.S. equity market. It aims to represent the performance of a combination of three factors: value, quality, and low volatility.
Cost & Other Expenses
Investors should also pay attention to an ETF’s expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the cheaper products in the space, this ETF has annual operating expenses of 0.15%.
The fund has a 12-month trailing dividend yield of 1.47%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it’s still important for investors to research a fund’s holdings.
Representing 25.70% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Financials round out the top three.
When you look at individual holdings, Apple Inc (AAPL) accounts for about 3% of the fund’s total assets, followed by Microsoft Corp (MSFT) and Broadcom Inc (AVGO).
The top 10 holdings account for about 20.55% of total assets under management.
Performance and Risk
The ETF has added roughly 6.78% and it’s up approximately 26.31% so far this year and in the past one year (as of 02/26/2024), respectively. QUS has traded between $109.24 and $141.07 during this last 52-week period.
The fund has a beta of 0.91 and standard deviation of 15.47% for the trailing three-year period, which makes QUS a medium risk choice in this particular space. With about 610 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR MSCI USA StrategicFactors ETF is a reasonable option for investors seeking to outperform the Style Box – Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $443.19 billion in assets, SPDR S&P 500 ETF has $499.56 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 – Large 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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SPDR MSCI USA StrategicFactors ETF (QUS): ETF Research Reports
Apple Inc. (AAPL) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Core S&P 500 ETF (IVV): ETF Research Reports
