Launched on 06/04/2014, the SPDR MSCI EAFE StrategicFactors ETF (QEFA) is a smart beta exchange traded fund offering 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
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
The fund is managed by State Street Global Advisors. QEFA has been able to amass assets over $912.62 million, making it one of the average sized ETFs in the Broad Developed World ETFs. QEFA seeks to match the performance of the MSCI EAFE Factor Mix A-Series Index before fees and expenses.
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
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.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.30%.
It has a 12-month trailing dividend yield of 2.92%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
Taking into account individual holdings, Nestle Sa Reg (NESN) accounts for about 2.03% of the fund's total assets, followed by Roche Holding Ag Genusschein (ROG) and Novartis Ag Reg (NOVN).
QEFA's top 10 holdings account for about 15.73% of its total assets under management.
Performance and Risk
Year-to-date, the SPDR MSCI EAFE StrategicFactors ETF return is roughly 3.59% so far, and was up about 11.18% over the last 12 months (as of 11/18/2024). QEFA has traded between $69.84 and $81.31 in this past 52-week period.
QEFA has a beta of 0.80 and standard deviation of 15.26% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 675 holdings, it effectively diversifies company-specific risk.
Alternatives
SPDR MSCI EAFE StrategicFactors ETF is a reasonable option for investors seeking to outperform the Broad Developed World ETFs segment of the market. However, there are other ETFs in the space which investors could 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 $53.72 billion in assets, iShares Core MSCI EAFE ETF has $118.47 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
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
