The Legg Mason (NYSE:LM) Low Volatility High Dividend ETF (LVHD) was launched on 12/28/2015, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Large Cap Value 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.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well 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.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
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
Because the fund has amassed over $738.68 million, this makes it one of the average sized ETFs in the Style Box - Large Cap Value. LVHD is managed by Franklin Templeton Investments. This particular fund, before fees and expenses, seeks to match the performance of the QS Low Volatility High Dividend Index.
The QS Low Volatility High Dividend Index provides stable income through investment in stocks of profitable U.S. companies with relatively high dividend yields, lower price and earnings volatility.
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.
Annual operating expenses for this ETF are 0.27%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.98%.
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.
When you look at individual holdings, Eaton (NYSE:ETN) Corp Plc accounts for about 2.83% of the fund's total assets, followed by Emerson (NYSE:EMR) Electric Co and Omnicom Group (NYSE:OMC).
LVHD's top 10 holdings account for about 25.86% of its total assets under management.
Performance and Risk
Year-to-date, the Legg Mason Low Volatility High Dividend ETF has added roughly 14.14% so far, and is up about 28.29% over the last 12 months (as of 06/24/2021). LVHD has traded between $27.86 and $37.38 in this past 52-week period.
The fund has a beta of 0.80 and standard deviation of 21.63% for the trailing three-year period. With about 76 holdings, it effectively diversifies company-specific risk.
Alternatives
Legg Mason Low Volatility High Dividend ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.
IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $53.39 billion in assets, Vanguard Value ETF has $80.05 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.
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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Legg Mason Low Volatility High Dividend ETF (LVHD): ETF Research Reports
Vanguard Value ETF (VTV): ETF Research Reports
iShares Russell 1000 Value ETF (IWD): ETF Research Reports
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