A smart beta exchange traded fund, the SPDR Russell 1000 Low Volatility Focus ETF (ONEV) debuted on 12/02/2015, and offers broad exposure to the Style Box - Large 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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 State Street Global Advisors, and has been able to amass over $585.58 million, which makes it one of the larger ETFs in the Style Box - Large Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Russell 1000 Low Volatility Focused Factor Index.
The Russell 1000 Low Volatility Focused Factor Index reflects the performance of a segment of large-capitalization U.S. equity securities demonstrating a combination of core factors high value, high quality, and low size characteristics, with a focus factor comprising low volatility characteristics.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.20%.
The fund has a 12-month trailing dividend yield of 1.60%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
ONEV's heaviest allocation is in the Industrials sector, which is about 17.60% of the portfolio. Its Information Technology and Financials round out the top three.
Taking into account individual holdings, Hp Inc. (NYSE:HPQ) accounts for about 1.23% of the fund's total assets, followed by Willis Towers Watson Public Limited Company (NYSE:WTW) and Cognizant Technology Solutions Corporation Class A (NASDAQ:CTSH).
The top 10 holdings account for about 7.8% of total assets under management.
Performance and Risk
The ETF has lost about -6.33% so far this year and was up about 0.69% in the last one year (as of 08/01/2022). In the past 52-week period, it has traded between $94.73 and $114.25.
The ETF has a beta of 0.96 and standard deviation of 24.21% for the trailing three-year period. With about 476 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR Russell 1000 Low Volatility Focus ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Core S&P 500 ETF (ETF:IVV) tracks S&P 500 Index and the SPDR S&P 500 ETF (ETF:SPY) tracks S&P 500 Index. IShares Core S&P 500 ETF has $306.38 billion in assets, SPDR S&P 500 ETF has $377.02 billion. IVV has an expense ratio of 0.03% and SPY charges 0.09%.
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 - Large Cap Blend.
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