A smart beta exchange traded fund, the John Hancock Multifactor Small Cap ETF (JHSC) debuted on 11/08/2017, and offers broad exposure to the Style Box - Small Cap Blend 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.
Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $687.49 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Blend. JHSC is managed by John Hancock. This particular fund seeks to match the performance of the JOHN HANCOCK DIMENSIONAL SMALL CAP INDEX before fees and expenses.
The John Hancock Dimensional Small Cap Index is designed to comprise a subset of securities in the U.S. Universe issued by companies whose market capitalizations are smaller than the 750th largest U.S. company but excluding the smallest 4% of U.S. companies at the time of reconstitution.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for this ETF are 0.42%, making it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.01%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For JHSC, it has heaviest allocation in the Industrials sector --about 18.9% of the portfolio --while Financials and Information Technology round out the top three.
Taking into account individual holdings, Darling Ingredients Inc (DAR) accounts for about 0.58% of the fund's total assets, followed by Littelfuse Inc (LFUS) and Element Solutions Inc (ESI).
The top 10 holdings account for about 4.71% of total assets under management.
Performance and Risk
The ETF return is roughly 15.39% so far this year and was up about 22.79% in the last one year (as of 07/02/2026). In the past 52-week period, it has traded between $39.08 and $48.60
The ETF has a beta of 0.99 and standard deviation of 18.43% for the trailing three-year period. With about 493 holdings, it effectively diversifies company-specific risk .
Alternatives
John Hancock Multifactor Small Cap ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. iShares Russell 2000 ETF has $82.07 billion in assets, iShares Core S&P Small-Cap ETF has $111.01 billion. IWM has an expense ratio of 0.19% and IJR changes 0.06%.
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 - Small Cap Blend
Bottom Line
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John Hancock Multifactor Small Cap ETF (JHSC): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).