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Is SPDR MSCI EAFE StrategicFactors ETF (QEFA) a Strong ETF Right Now?

A smart beta exchange traded fund, the SPDR MSCI EAFE StrategicFactors ETF (QEFA) debuted on 06/04/2014, and offers broad exposure to the Broad Developed World ETFs category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

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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

Because the fund has amassed over $997.15 million, this makes it one of the average sized ETFs in the Broad Developed World ETFs. QEFA is managed by State Street Global Advisors. Before fees and expenses, QEFA seeks to match the performance of the MSCI EAFE Factor Mix A-Series Index.

The MSCI EAFE Factor Mix A-Series Index captures large and mid-cap representation across 22 developed market Europe, Australasia, and Far East countries and aims to represent the performance of value, low volatility, and quality factor strategies.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.30% for this ETF, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 2.74%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Novo Nordisk A/s Class B (NOVO.B-DK) accounts for about 2.83% of total assets, followed by Nestle S.a. (NESN-CH) and Roche Holding Ltd Dividend Right Cert. (ROG-CH).

QEFA's top 10 holdings account for about 17.76% of its total assets under management.

Performance and Risk

Year-to-date, the SPDR MSCI EAFE StrategicFactors ETF has gained about 10.33% so far, and was up about 7.60% over the last 12 months (as of 05/03/2023). QEFA has traded between $55.35 and $71.67 in this past 52-week period.

The fund has a beta of 0.77 and standard deviation of 16.52% for the trailing three-year period, which makes QEFA a medium risk choice in this particular space. With about 713 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR MSCI EAFE StrategicFactors ETF is not a suitable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

IShares MSCI EAFE ETF (EFA) tracks MSCI EAFE Index and the iShares Core MSCI EAFE ETF (IEFA) tracks MSCI EAFE Investable Market Index. IShares MSCI EAFE ETF has $49.56 billion in assets, iShares Core MSCI EAFE ETF has $97.96 billion. EFA has an expense ratio of 0.33% and IEFA charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Broad Developed World ETFs.

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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SPDR MSCI EAFE StrategicFactors ETF (QEFA): ETF Research Reports

iShares MSCI EAFE ETF (EFA): ETF Research Reports

iShares Core MSCI EAFE ETF (IEFA): ETF Research Reports

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Zacks Investment Research