The iShares MSCI USA Quality Factor ETF (QUAL) was launched on 07/16/2013, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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. QUAL has been able to amass assets over $53.52 billion, making it one of the largest ETFs in the Style Box - All Cap Blend. This particular fund seeks to match the performance of the MSCI USA Sector Neutral Quality Index before fees and expenses.
The MSCI USA Sector Neutral Quality Index is based on a traditional market capitalization-weighted parent index, the MSCI USA Index which includes U.S. large and mid capitalization stocks.
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 0.15% for QUAL, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.01%.
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 33% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Nvidia Corp (NVDA) accounts for about 6.4% of the fund's total assets, followed by Microsoft Corp (MSFT) and Apple Inc (AAPL).
Its top 10 holdings account for approximately 41.43% of QUAL's total assets under management.
Performance and Risk
The ETF has gained about 4.28% so far this year and is up roughly 6.95% in the last one year (as of 07/11/2025). In the past 52-week period, it has traded between $152.42 and $186.85
The ETF has a beta of 1.04 and standard deviation of 17.21% for the trailing three-year period, making it a medium risk choice in the space. With about 129 holdings, it effectively diversifies company-specific risk .
Alternatives
iShares MSCI USA Quality Factor ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. iShares Core S&P Total U.S. Stock Market ETF has $72.02 billion in assets, Vanguard Total Stock Market ETF has $506.04 billion. ITOT has an expense ratio of 0.03% and VTI changes 0.03%.
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 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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iShares MSCI USA Quality Factor ETF (QUAL): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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