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Launched on 01/14/2020, the iShares MSCI USA Quality GARP ETF (GARP) is a smart beta exchange traded fund offering broad exposure to the Style Box - All Cap Growth category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
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
Because the fund has amassed over $315.23 million, this makes it one of the average sized ETFs in the Style Box - All Cap Growth. GARP is managed by Blackrock. This particular fund seeks to match the performance of the MSCI USA QUALITY GARP SELECT INDEX before fees and expenses.
The MSCI USA Quality GARP Select Index composes of U.S. large and mid-capitalization growth stocks exhibiting favourable value and quality characteristics.
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 one of the least expensive products in the space, this ETF has annual operating expenses of 0.15%.
The fund has a 12-month trailing dividend yield of 0.50%.
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.
Representing 46% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Consumer Discretionary and Financials round out the top three.
When you look at individual holdings, Microsoft Corp (MSFT) accounts for about 5.39% of the fund's total assets, followed by Mastercard Inc Class A (MA) and Apple Inc (AAPL).