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

Making its debut on 04/28/2015, smart beta exchange traded fund iShares U.S. Equity Factor ETF (LRGF) 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.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

The fund is sponsored by Blackrock. It has amassed assets over $2.44 billion, making it one of the largest ETFs in the Style Box - All Cap Value. LRGF seeks to match the performance of the MSCI USA Diversified Multiple-Factor Index before fees and expenses.

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

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.

Annual operating expenses for LRGF are 0.08%, which makes it one of the least expensive products in the space.

It's 12-month trailing dividend yield comes in at 1.19%.

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.

LRGF's heaviest allocation is in the Information Technology sector, which is about 32.60% of the portfolio. Its Financials and Consumer Discretionary round out the top three.

When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 5.91% of the fund's total assets, followed by Apple Inc (AAPL) and Nvidia Corp (NVDA).

The top 10 holdings account for about 30.52% of total assets under management.

Performance and Risk

The ETF return is roughly 3.06% and is up about 15.68% so far this year and in the past one year (as of 06/04/2025), respectively. LRGF has traded between $51.37 and $63.95 during this last 52-week period.

The ETF has a beta of 0.96 and standard deviation of 17.96% for the trailing three-year period, making it a medium risk choice in the space. With about 292 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Equity Factor ETF is an excellent option for investors seeking to outperform the Style Box - All Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.

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 $16.81 billion in assets, iShares Core S&P U.S. Value ETF has $20.16 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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This article originally published on Zacks Investment Research (zacks.com).

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