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Is iShares MSCI ACWI Low Carbon Target ETF (CRBN) a Strong ETF Right Now?

The iShares MSCI ACWI Low Carbon Target ETF (CRBN) made its debut on 12/08/2014, and is a smart beta exchange traded fund that provides broad exposure to the 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.

 

A good option for investors who believe in market efficiency, market cap weighted indexes offer 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.

 

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.

 

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

The fund is managed by Blackrock. CRBN has been able to amass assets over $458.50 million, making it one of the larger ETFs in the World ETFs. Before fees and expenses, this particular fund seeks to match the performance of the MSCI ACWI Low Carbon Target Index.

 

The MSCI ACWI Low Carbon Target Index is designed to address two dimensions of carbon exposure ? carbon emissions and potential carbon emissions from fossil fuel reserves.

 

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

 

Operating expenses on an annual basis are 0.20% for CRBN, making it one of the least expensive products in the space.

 

CRBN’s 12-month trailing dividend yield is 1.96%.

 

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

 

When you look at individual holdings, Apple Inc (AAPL) accounts for about 4.23% of the fund’s total assets, followed by Microsoft Corp (MSFT) and Amazon Com Inc (AMZN).

 

CRBN’s top 10 holdings account for about 16.27% of its total assets under management.

 

Performance and Risk

The ETF has added about 2.03% and is up roughly 11.15% so far this year and in the past one year (as of 10/01/2020), respectively. CRBN has traded between $89.44 and $137.90 during this last 52-week period.

 

CRBN has a beta of 0.95 and standard deviation of 20.72% for the trailing three-year period, which makes the fund a low risk choice in the space. With about 1416 holdings, it effectively diversifies company-specific risk.

 

Alternatives

IShares MSCI ACWI Low Carbon Target ETF is a reasonable option for investors seeking to outperform the World ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

 

IShares ESG MSCI EM ETF (ESGE) tracks MSCI Emerging Markets ESG Focus Index and the iShares ESG MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. IShares ESG MSCI EM ETF has $3.69 billion in assets, iShares ESG MSCI USA ETF has $8.77 billion. ESGE has an expense ratio of 0.25% and ESGU charges 0.15%.

 

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the World ETFs.

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