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

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?

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.

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

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.

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. QEFA has been able to amass assets over $728.70 million, making it one of the average sized ETFs in the Broad Developed World ETFs. This particular fund 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

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Operating expenses on an annual basis are 0.30% for QEFA, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 3.70%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

Looking at individual holdings, Nestle S.a. (NESN-CH) accounts for about 2.74% of total assets, followed by Roche Holding Ltd Dividend Right Cert. (ROG-CH) and Novo Nordisk A/s Class B.

QEFA's top 10 holdings account for about 17.14% of its total assets under management.

Performance and Risk

The ETF has lost about -22.47% so far this year and is down about -21.40% in the last one year (as of 10/26/2022). In the past 52-week period, it has traded between $55.35 and $78.61.

The ETF has a beta of 0.75 and standard deviation of 21.62% for the trailing three-year period, making it a medium risk choice in the 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 $41.81 billion in assets, iShares Core MSCI EAFE ETF has $79.94 billion. EFA has an expense ratio of 0.32% 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.


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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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