Is IShares Edge MSCI Multifactor USA ETF (LRGF) A Strong ETF Right Now?

The iShares Edge MSCI Multifactor USA ETF (LRGF) made its debut on 04/28/2015, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

The fund is managed by Blackrock (NYSE:BLK). LRGF has been able to amass assets over $715.50 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. LRGF, before fees and expenses, seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index.

The MSCI USA Diversified Multiple-Factor Index is composed of U.S. large and mid-capitalization stocks that have favourable exposure to target style factors subject to constraints.

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 0.20% for this ETF, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.36%.

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.

Representing 27.30% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Consumer Discretionary round out the top three.

When you look at individual holdings, Walmart Inc (NYSE:WMT) accounts for about 3.64% of the fund's total assets, followed by Intel Corporation Corp (NASDAQ:INTC) and At&t Inc (T).

LRGF's top 10 holdings account for about 28.49% of its total assets under management.

Performance and Risk

The ETF has lost about -21.27% so far this year and is down about -10.27% in the last one year (as of 03/27/2020). In the past 52-week period, it has traded between $22.90 and $35.80.

The ETF has a beta of 0.97 and standard deviation of 20.10% for the trailing three-year period, making it a medium risk choice in the space. With about 162 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Edge MSCI Multifactor USA ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $30.86 billion in assets, Vanguard Value ETF has $42.66 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

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 Value.

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.