Is SPDR Russell 1000 Momentum Focus ETF (ONEO) A Hot ETF Right Now?

Making its debut on 12/02/2015, smart beta exchange traded fund SPDR Russell 1000 Momentum Focus ETF (NYSE:ONEO) provides investors broad exposure to the Large Cap ETFs category of the U.S. equity 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.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track 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.

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 State Street Global Advisors. ONEO has been able to amass assets over $584.92 M, making it one of the average sized ETFs in the Large Cap ETFs. This particular fund seeks to match the performance of the Russell 1000 Momentum Focused Factor Index before fees and expenses.

The Russell 1000 Momentum Focused Factor Index reflects the performance of a segment of large-capitalization U.S. equity securities demonstrating a combination of core factors with a focus factor comprising high momentum characteristics.

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.

Annual operating expenses for ONEO are 0.20%, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 1.61%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

Representing 19.80% of the portfolio, the fund has heaviest allocation to the Consumer Discretionary sector; Information Technology and Industrials round out the top three.

Taking into account individual holdings, Micron Technology Inc. (NASDAQ:MU) accounts for about 0.87% of the fund's total assets, followed by Lear Corporation (LEA) and Best Buy Co. Inc. (NYSE:BBY).

The top 10 holdings account for about 6.91% of total assets under management.

Performance and Risk

ONEO return is roughly 1.49% so far this year, and as of 05/18/2018, is up about 17.09% in the last one year. In the past 52-week period, the fund has traded between $68.30 and $77.24.

ONEO has a beta of 0.93 and standard deviation of 12.97% for the trailing three-year period. With about 879 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR Russell 1000 (NYSE:SPLG) Momentum Focus ETF is a reasonable option for investors seeking to outperform the Large Cap ETFs 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 (NYSE:SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $146.72 B in assets, SPDR S&P 500 (MX:SPY) ETF has $259.51 B. IVV has an expense ratio of 0.04% 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 Large Cap ETFs.

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.