A smart beta exchange traded fund, the John Hancock Multifactor Small Cap ETF (JHSC) debuted on 11/08/2017, and offers broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
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.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $610.13 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. JHSC is managed by John Hancock. Before fees and expenses, JHSC seeks to match the performance of the JOHN HANCOCK DIMENSIONAL SMALL CAP INDEX.
The John Hancock Dimensional Small Cap Index is designed to comprise a subset of securities in the U.S. Universe issued by companies whose market capitalizations are smaller than the 750th largest U.S. company but excluding the smallest 4% of U.S. companies at the time of reconstitution.
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.
Annual operating expenses for JHSC are 0.42%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.02%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 22.4% of the portfolio. Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Wayfair Inc Class A (W) accounts for about 0.68% of the fund's total assets, followed by Ssc Government Mm Gvmxx and Oshkosh Corp (OSK).
Its top 10 holdings account for approximately 5.64% of JHSC's total assets under management.
Performance and Risk
The ETF has gained about 4.53% and was up about 3.4% so far this year and in the past one year (as of 10/14/2025), respectively. JHSC has traded between $32.47 and $43.65 during this last 52-week period.
The fund has a beta of 1.05 and standard deviation of 19.64% for the trailing three-year period. With about 489 holdings, it effectively diversifies company-specific risk .
Alternatives
John Hancock Multifactor Small Cap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. iShares Russell 2000 ETF has $68.81 billion in assets, iShares Core S&P Small-Cap ETF has $84.3 billion. IWM has an expense ratio of 0.19% and IJR changes 0.06%.
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 - Small 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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John Hancock Multifactor Small Cap ETF (JHSC): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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