Morningstar - Q2 2021 - 54
Strategies
Thoughtful Momentum
IShares MSCI USA Momentum Factor ETF offers a sound
process at a low cost.
BEST IDEAS: PASSIVE
Ryan Jackson
IShares MSCI USA Momentum Factor ETF MTUM
This article is adapted from the ETF's Morningstar Global Fund Report dated
March 10, 2021.
Stats 03/31/21
IShares MSCI USA Momentum Factor ETF MTUM offers thoughtfully
constructed exposure to the momentum factor at a compelling price. A sound
process and a low fee earn the fund a Morningstar Analyst Rating of Silver.
Morningstar Analyst Rating
„
Morningstar Category
Large Growth
Expense Ratio
0.50%
Total Assets
$14.4 Billion
3-Yr Annlzd Return
18.54%
3-Yr % Rank in Cat
57
People
Above Avg
Parent
Above Avg
Morningstar Pillars 03/31/21
Momentum describes the fact that short-term performance-both good and
bad-tends to persist, albeit briefly. This effect likely arises because the
market reacts to new information slowly, causing prices to move less than
they should in reaction to new news. The fund effectively captures this
factor by selecting and weighting stocks based on their recent risk-adjusted
performance. Focusing on risk-adjusted rather than absolute returns
improves the quality of the fund's momentum signal-weeding out stocks
that see significant one-off spikes in their share price.
Process
Above Avg
Growth of 10K 03/31/21
iShares MSCI USA Momentum Factor ETF
15.79
The fund naturally favors the market's hottest sectors. This has translated
to a consistent overweight in technology stocks since its 2013 inception. At the
end of February 2021, tech firms represented 42% of the portfolio-a hefty
stake, but one that reflects the state of the market. The Russell 1000
Growth Index parks 45% of its portfolio in tech. The fund's bogy puts a 5%
cap on each holding, easing concerns over firm-specific risk.
This index has buffers to limit turnover, but maintaining exposure to the
momentum factor requires regularly reshuffling the deck. The fund's turnover
ratio has eclipsed 100% each of the past seven years. Its new benchmark
won't curb turnover, but it should mitigate the market impact costs of its regular
rebalancing, which can hurt returns. K
Ryan Jackson is an associate manager research analyst for Morningstar Research
Services LLC.
5
04/2018
04/2019
Growth
Morningstar Ratings 03/31/21
Snapshot as
of most recent
portfolio.
Mstar
Period Return
Small
Mid
Large
Blend
Mstar
Risk
Mstar
Rating
3-Yr
Below Avg Below Avg QQ
5-Yr
Average
Below Avg QQQ
10-Yr
-
-
-
QQQ
Overall Rating
Top 5 Sectors 03/31/21
Sectors
■ Fund %
❙ Category Average %
32.3
a Technology
16.2
t Consumer Cyclical
14.5
i Communication Services
12.1
d Healthcare
5.9
0
Morningstar Q2 2021
04/2020
Morningstar Style Box 03/31/21
p Industrials
54
15
10
Morningstar US Large Growth
Value
This fund started tracking the MSCI USA Momentum SR Variant Index
in May 2020. This index is nearly identical to the fund's previous benchmark,
the MSCI USA Momentum Index. The only difference is that it trades
over three days around each rebalance date rather than all at once. Investors
should welcome the change, as it should reduce the transaction costs
associated with portfolio turnover.
$20K
18.09
35.3
18.8
14.6
13.8
7.1
10
20
30
40
Morningstar - Q2 2021
Table of Contents for the Digital Edition of Morningstar - Q2 2021
Contents
Morningstar - Q2 2021 - Cover1
Morningstar - Q2 2021 - Cover2
Morningstar - Q2 2021 - 1
Morningstar - Q2 2021 - 2
Morningstar - Q2 2021 - Contents
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Morningstar - Q2 2021 - Cover3
Morningstar - Q2 2021 - Cover4
Morningstar - Q2 2021 - M1
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