We have qualitatively reviewed this strategy and reaffirmed its Average Process and Above Average People ratings. IShares U.S. Equity Factor ETF LRGF remains a conservative multifactor strategy whose comprehensive constraints water down its factor exposure. The fund is cheap and has sensible components, but its modest and uneven factor tilts dull its edge. The following text is from April 19, 2023.

The STOXX U.S. Equity Factor Index, which has underpinned this fund since June 2022, has some sensible features. It employs an optimizer that selects and weights stocks based on a composite score that encapsulates five factors: quality (36% of score), value (27%), momentum (27%), low-volatility (5%), and small size (5%). Each factor confers risk-reducing or return-enhancing benefits. Pursuing them together can improve diversification because factors tend to thrive at different times. For example, the quality and momentum factors traditionally coast when value stocks slump.

That said, the index's factor tilts don't look pronounced or consistent enough to provide a durable edge on the broad market. Only its quality bent was detectable over two decades of backtested data, and even that was about as distinct as the S&P 500's tilt versus the broader market. Quality exposure was also unpredictable. It went mute from 2019 through 2021-- a scorching run for the quality factor -- which left the benchmark behind the Russell 1000 during a span when it should have excelled. The new benchmark’s comprehensive constraints explain the muted exposure, as it's difficult to capture factors without drifting far from the broad market.

The index constraints offer some benefits. The benchmark ties its sector composition to the parent index, reducing active risk that is unlikely to be compensated over the long-term. Capping the weight of individual firms helps the index avoid concentration risk, and tighter turnover constraints should keep transaction costs under wraps. So, while the constraints dilute the fund’s factor tilts, they also cut back on risk in the process.

The fund has a short track record with its new benchmark, but the early returns are positive. It led the Russell 1000 by 97 basis points from its June 2022 adoption through March 2023. Whether it winds up ahead or behind, returns shouldn't differ from the broad market by much. The index aims to hold returns within 1 percentage point of the STOXX USA 900 Index, its broad-market parent index.

Analyst Rating

Conservative and cost-efficient.

Analyst

Ryan Jackson

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Broadcom

JPMorgan Chase & Co

Procter & Gamble

Visa

We have qualitatively reviewed this strategy and reaffirmed its Above Average Process rating. The following text is from April 19, 2023.

This fund's new benchmark astutely controls for risk, but its factor tilts look too modest and inconsistent to power it ahead of the category benchmark long-term. It earns an Average Process Pillar rating.

Average

Process

We have qualitatively reviewed this strategy and reaffirmed its Above Average People rating. The following text is from April 19, 2023.

BlackRock's industry-leading technology, global footprint, and extensive supporting cast earn an Above Average People Pillar rating. The team employs BlackRock's Aladdin platform to fulfill much of its portfolio management tasks, and global trading desks allow traders to conduct foreign transactions in a cost-effective way.

The iShares index equity team has endured some internal turnover at the top over the past few years. But index-tracking performance should remain tight, thanks to heavily automated processes, a large team of seasoned professionals and several long-tenured managers that remain at the helm. Amy Whitelaw left the team in February 2023 for another role within the organization. Paul Whitehead replaced Alan Mason as a manager in January 2022, when Mason left to focus on the firm's customized institutional indexing capabilities. The broader index equity group, co-headed by Jennifer Hsui and Paul Whitehead, will continue to oversee iShares equity ETFs.

These managers interact with a wider team of traders and managers around the globe to execute the fund's day-to-day operations. The larger number of managers also limits the impact of personnel turnover when it does occur.

Above Average

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares MSCI USA Multifactor ETF

LRGF tracks an index of US large- and mid-cap equities. Stocks are selected and weighted to maximize exposure to five factors: momentum, quality, value, low volatility, and size.

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BlackRock has made changes to two ETFs within its iShares Multifactor suite. Effective Wednesday, the iShares US Equity Factor ETF (LRGF) will follow the STOXX US Equity Factor Index, while the iShares International Equity Factor ETF (INTF) will follow the STOXX International Equity Factor Index.

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NEW YORK--(BUSINESS WIRE)--Effective today, BlackRock implemented changes to the iShares Multifactor suite, bringing enhanced systematic multifactor investing capabilities to the foundation of portfolio construction. The iShares US Equity Factor ETF (LRGF) and the iShares International Equity Factor ETF (INTF) updates are as follows: Summary of Enhancements LRGF INTF New Fund Name iShares US Equity Factor ETF iShares International Equity Factor ETF New Investment Objective Seeks to track the in

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Analysts Expect The iShares Edge MSCI Multifactor USA ETF To Hit $35

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Implied iShares Edge MSCI Multifactor USA ETF Analyst Target Price: $35

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