A smart beta exchange traded fund, the Xtrackers Net Zero Pathway Paris Aligned US Equity ETF (USNZ) debuted on 06/28/2022, and offers broad exposure to the Style Box - All Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
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.
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.
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 Deutsche Bank Ag. USNZ has been able to amass assets over $207.65 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. This particular fund seeks to match the performance of the SOLACTIVE ISS ESG US NT ZR PATHWY ENH ID before fees and expenses.
The Solactive ISS ESG United States Net Zero Pathway Enhanced Index comprised of large and mid-capitalization companies in the United States that meet certain environmental, social and governance criteria.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Operating expenses on an annual basis are 0.10% for USNZ, making it one of the least expensive products in the space.
USNZ's 12-month trailing dividend yield is 1.29%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Taking into account individual holdings, Apple Inc (AAPL) accounts for about 8.69% of the fund's total assets, followed by Microsoft Corp (MSFT) and Nvidia Corp (NVDA.O).
The top 10 holdings account for about 36.26% of total assets under management.
Performance and Risk
Year-to-date, the Xtrackers Net Zero Pathway Paris Aligned US Equity ETF has lost about -10.16% so far, and is up about 5.13% over the last 12 months (as of 04/23/2025). USNZ has traded between $31.29 and $38.80 in this past 52-week period.
The fund has a beta of 1 and standard deviation of 17.59% for the trailing three-year period. With about 336 holdings, it effectively diversifies company-specific risk.
Alternatives
Xtrackers Net Zero Pathway Paris Aligned US Equity 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 ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $11.81 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $22.26 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
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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Xtrackers Net Zero Pathway Paris Aligned US Equity ETF (USNZ): ETF Research Reports Apple Inc. (AAPL): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports JPMorgan Nasdaq Equity Premium Income ETF (JEPQ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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