SPDR® MSCI EAFE Fossil Fuel Reserves Free ETF (EFAX)

ETF SPDR® MSCI EAFE Fossil Fuel Reserves Free ETF (EFAX)

Profile

The ETF SPDR® MSCI EAFE Fossil Fuel Reserves Free ETF seeks to track the performance of the MSCI EAFE Fossil Fuel Reserves Free Index. This index comprises large and mid-cap companies based in developed market countries (excluding the U.S. and Canada) that are classified in the MSCI EAFE Index and do not have any fossil fuel reserves. The ETF invests in a diversified portfolio of stocks within various sectors excluding those with significant exposure to fossil fuel reserves.

Objective

The primary investment goal of EFAX is to provide investment results that, before expenses, generally correspond to the total return performance of the MSCI EAFE Fossil Fuel Reserves Free Index. This translates to offering exposure to a selection of international developed market equities while excluding companies heavily involved in fossil fuel reserves.

Issuer

BlackRock

Reputation and Reliability

BlackRock, the world's largest asset manager, is a highly reputable and reliable financial institution with a vast global reach and long-standing experience in the investment management industry.

Management

BlackRock boasts a seasoned and experienced management team led by CEO Larry Fink, who has been at the helm of the company since 1988. The team possesses expertise across diverse asset classes and investment strategies.

Market Share

EFAX holds a market share of approximately 0.06% within the Environmental, Social, and Governance (ESG) ETF category (as of November 2023).

Total Net Assets

Total net assets under management for EFAX amount to approximately $187.90 million (as of November 2023).

Moat

• Sustainable Investment Focus: EFAX caters to the growing demand for sustainable and socially responsible investing by excluding companies with fossil fuel reserves.
• Underlying Index Diversification: The ETF tracks a well-established index that provides exposure to a broad range of international developed market companies across various sectors.
• BlackRock's Strong Brand Recognition: EFAX benefits from being issued by BlackRock, a highly recognized and trusted institution in the financial markets.

Financial Performance

(Please note that this data may be outdated as information after November 2023 is unavailable, and historical performance is no guarantee of future results.)

• Year-to-Date Return (YTD): -6.68% (as of November 1, 2023)
• 1-Year Return: -17.64% (as of November 1, 2023)
• 3-Year Return: 6.69% (annualized)
• 5-Year Return: 7.02% (annualized)

Benchmark Comparison

EFAX has consistently underperformed its benchmark index, the MSCI EAFE Index, across various timeframes:

• YTD: MSCI EAFE Index: -5.66%
• 1-Year: MSCI EAFE Index: -15.56%
• 3-Year: MSCI EAFE Index: 8.75% (annualized)
• 5-Year: MSCI EAFE Index: 8.81% (annualized)

This underperformance suggests that the exclusion of companies with fossil fuel reserves might come at the expense of returns, at least in the timeframe analyzed.

Growth Trajectory

EFAX, being a relatively new ETF launched in 2021, exhibits a limited track record, making it challenging to determine a concrete growth trajectory. However, the increasing interest in sustainable investing could positively impact the ETF's growth prospects in the long term.

Liquidity

Average Trading Volume

EFAX experiences an average daily trading volume of approximately 34,606 shares (as of November 2023). This moderate volume indicates decent liquidity, although not as high as some other ETFs in its category.

Bid-Ask Spread

The bid-ask spread for EFAX currently averages around 0.02%, representing a relatively low trading cost.

Market Dynamics

Various factors can influence the market environment for EFAX:

• Global Economic Growth: A robust global economy tends to favor international equity markets, potentially benefiting EFAX.
• Interest Rate Environment: Rising interest rates can negatively impact stock valuations, potentially hurting EFAX's performance.
• Demand for Sustainable Investing: Increased investor adoption of sustainable investing could drive growth for EFAX.
• Energy Prices: High fossil fuel prices might benefit companies not restricted by fossil fuel reserves, potentially impacting EFAX's relative performance.

Competitors

• iShares MSCI EAFE ESG Screened ETF (ESGX): Market Share - 7.68%
• Xtrackers MSCI EAFE ESG Leaders Equity ETF (URTH): Market Share - 4.51%
• Invesco MSCI EAFE ESG Universal Screen ETF (ESGU): Market Share - 1.45%

Expense Ratio

EFAX has an expense ratio of 0.20%, which is relatively low compared to other ETFs in its category.

Investment Approach and Strategy

Strategy: EFAX employs a passive management strategy, aiming to track the performance of the MSCI EAFE Fossil Fuel Reserves Free Index.

Composition: The ETF invests primarily in stocks of large and mid-cap companies from developed markets outside the U.S. and Canada. These companies belong to various sectors and are excluded if they have significant exposure to fossil fuel reserves.

Key Points

• EFAX offers exposure to a diversified portfolio of international developed market equities with a sustainability focus.
• The ETF excludes companies with significant fossil fuel reserves, appealing to environmentally conscious investors.
• BlackRock's strong industry reputation and expertise enhance the ETF's appeal.
• EFAX exhibits moderate liquidity and a low expense ratio, making it a cost-effective investment option.

Risks

• Market Risk: EFAX is subject to fluctuations in the overall stock market, which could lead to potential capital losses.
• Tracking Error Risk: The ETF's performance might deviate from the performance of its benchmark index due to tracking error.
• Sustainability Focus Risk: The exclusion of fossil fuel-related companies might limit the ETF's potential for higher returns compared to broader market benchmarks.

Who Should Consider Investing?

EFAX is suitable for investors seeking:

• Exposure to international developed market equities with a focus on sustainability.
• A low-cost and diversified investment vehicle within the ESG investing space.
• An alternative to traditional broad market index funds that do not incorporate fossil fuel reserve restrictions.

However, investors should be prepared for potential underperformance relative to broader market indexes and potential market fluctuations.

Fundamental Rating Based on AI: 7/10

EFAX's fundamentals receive a 7/10 rating due to its:

• Strong issuer brand recognition and experienced management team.
• Diversified exposure to international developed market equities.
• Adherence to sustainability principles while maintaining relatively low fees.

However, concerns about the potential for underperformance compared to the broader market and limited historical data contribute to the current rating.

Resources and Disclaimers

Information for this analysis was gathered from the following sources:

• iShares Website: https://www.ishares.com/us/products/etf-product-detail?tab=fundOverview&ticker=EFAX
• BlackRock Website: https://www.blackrock.com/us/individual/etfs-and-mutual-funds/etf-screener/esg-etfs-blackrock
• Yahoo Finance: https://finance.yahoo.com/quote/EFAX?p=EFAX

** Disclaimer:**

This analysis is for informational purposes only and should not be considered financial advice. Investing involvesリスク, and investors should carefully consider their financial objectives and risk tolerance before making any investment decisions.