Making its debut on 01/11/2018, smart beta exchange traded fund American Century U.S. Quality Value ETF (VALQ) provides investors broad exposure to the Style Box - All 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
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
Because the fund has amassed over $251.3 million, this makes it one of the larger ETFs in the Style Box - All Cap Value. VALQ is managed by American Century Investments. This particular fund, before fees and expenses, seeks to match the performance of the AMERICAN CENTURY U.S. QUALITY VALUE INDX.
The American Century U.S. Quality Value Index seeks to select securities of large and mid-capitalization companies that are undervalued or have sustainable income.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.29% for VALQ, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 1.73%.
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 26% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Healthcare and Consumer Staples round out the top three.
When you look at individual holdings, Cisco Systems Inc (CSCO) accounts for about 2.81% of the fund's total assets, followed by Lockheed Martin Corp (LMT) and Merck + Co. Inc. (MRK).
Its top 10 holdings account for approximately 25.2% of VALQ's total assets under management.
Performance and Risk
Year-to-date, the American Century U.S. Quality Value ETF has added about 4.56% so far, and is up about 12.57% over the last 12 months (as of 07/11/2025). VALQ has traded between $54.09 and $64.64 in this past 52-week period.
The fund has a beta of 0.87 and standard deviation of 14.59% for the trailing three-year period. With about 231 holdings, it effectively diversifies company-specific risk .
Alternatives
American Century U.S. Quality Value 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.
Fidelity High Dividend ETF (FDVV) tracks Fidelity Core Dividend Index and the iShares Core S&P U.S. Value ETF (IUSV) tracks S&P 900 Value Index. Fidelity High Dividend ETF has $5.86 billion in assets, iShares Core S&P U.S. Value ETF has $21.36 billion. FDVV has an expense ratio of 0.16% and IUSV changes 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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American Century U.S. Quality Value ETF (VALQ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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