An In-Depth Look at the Vident U.S. Equity Strategy ETF (VUSE) for Investors

The Vident U.S. Equity Strategy ETF, known by its ticker VUSE, is a notable smart beta exchange-traded fund that has been providing investors with an innovative approach to the U.S. equities market since its inception on January 22, 2014. As a member of the Style Box - All Cap Value category, it offers a broad spectrum of investment opportunities and aims to provide a strategic balance between risk and return.

Understanding Smart Beta ETFs

Traditional market cap weighted indexes have long been the benchmark for reflecting market segments or the entire market. These strategies are favorable for investors who rely on market efficiency, as they deliver market returns cost-effectively and transparently. In contrast, smart beta ETFs, like VUSE, cater to investors looking to outperform the market through non-cap weighted strategies. These ETFs select stocks based on fundamental characteristics or combinations thereof, targeting better risk-return performance with methodologies such as equal-weighting, fundamental weighting, and volatility/momentum-based weighting.

Fund Sponsorship and Index Alignment

Vident Financial manages the fund, and it is designed to track the performance of the Vident Core U.S. Equity Index. This rules-based index focuses on systematically chosen equity securities within the U.S. market, specifically those issued by companies domiciled in the United States. With over $508.44 million in assets under management, VUSE stands as a substantial ETF offering within the All Cap Value space.

Cost Considerations and Expenses

The annual operating expenses of VUSE are set at 0.50%, making it competitive in pricing relative to its peers. With attention to the fund's total return potential, investors take note of the 1.43% dividend yield it has generated over the past 12 months.

Sector Exposure and Leading Holdings

Diversification is a crucial aspect of ETFs, and VUSE offers this by revealing its holdings daily. This fund primarily invests in the Information Technology sector, with a significant 25.40% allocation. Financials and Healthcare are also focal sectors within the portfolio. Two of the fund's notable holdings include MSFT, or Microsoft Corporation, and WMT, or Walmart Inc. Microsoft Corporation has solidified its global standing as a tech giant, with a diverse range of flagship software and hardware products, while Walmart Inc. maintains its position as a retail behemoth operating both brick-and-mortar and club stores across the globe. Collectively, the ETF's top ten holdings represent about 22.26% of its total assets under management.

Assessing Performance and Risk

VUSE has seen an increase of 12.85% this year and has grown roughly 14.91% over the past one year as of November 10, 2023. In the 52-week timeframe, the ETF's price has fluctuated between $41.06 and $49.18. It holds a beta of 1.14 and a standard deviation of 19.49% for the trailing three-year period, indicating a moderate risk investment. With around 125 holdings, VUSE effectively reduces company-specific risk.

Alternative Investment Options

While VUSE is a viable choice for those aiming to outdo the Style Box - All Cap Value market segment, investors may also consider other ETFs like the Dimensional U.S. Targeted Value ETF DFAT and the iShares Core S&P U.S. Value ETF IUSV. DFAT manages $7.92 billion in assets and has an expense ratio of 0.28%, while IUSV oversees $13.60 billion with a fee of 0.04%. For those preferring lower risk and cost, traditional market cap weighted ETFs might be an option worth exploring.

Final Considerations

Investors aiming to diversify their portfolios with a focus on the U.S. equity market may find the Vident U.S. Equity Strategy ETF VUSE to be aligned with their investment goals. As with any investment, it's crucial to perform thorough research and evaluate performance, risk, and other key factors.

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