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30 January
Is iShares U.S. Equity Factor ETF (LRGF) a Strong ETF Right Now?

The iShares U.S. Equity Factor 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 - All Cap Value 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.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is managed by Blackrock. LRGF has been able to amass assets over $2.38 billion, making it one of the largest ETFs in the Style Box - All Cap Value. LRGF, before fees and expenses, seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index.

The STOXX U.S. Equity Factor Index composes of U.S. large and mid-capitalization stocks that have favourable exposure to target style factors subject to constraints.

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.

Annual operating expenses for this ETF are 0.08%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.19%.

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.

This ETF has heaviest allocation in the Information Technology sector - about 32.40% of the portfolio. Consumer Discretionary and Financials round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 6.90% of the fund's total assets, followed by Nvidia Corp (NVDA) and Microsoft Corp (MSFT).

LRGF's top 10 holdings account for about 33.29% of its total assets under management.

Performance and Risk

So far this year, LRGF has added roughly 3.43%, and is up about 26.52% in the last one year (as of 01/30/2025). During this past 52-week period, the fund has traded between $49.16 and $63.26.

The fund has a beta of 0.98 and standard deviation of 17.29% for the trailing three-year period, which makes LRGF a medium risk choice in this particular space. With about 282 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Equity Factor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

Capital Group Dividend Value ETF (CGDV) tracks ---------------------------------------- and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Capital Group Dividend Value ETF has $13.36 billion in assets, iShares Core S&P U.S. Value ETF has $20.30 billion. CGDV has an expense ratio of 0.33% and IUSV 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 - All 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.

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iShares U.S. Equity Factor ETF (LRGF): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

iShares Core S&P U.S. Value ETF (IUSV): ETF Research Reports

Capital Group Dividend Value ETF (CGDV): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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