It tracks a multifactor index of US large- and mid-cap stocks, using a quantitative model to select stocks with high exposure to the momentum, quality, value, low volatility, and size factors.

It suits long-term investors who want to diversify across several style premiums rather than concentrate in a single factor.

BlackRock (iShares) launched it in 2015, and it is a passively managed ETF that tracks an index.

Within a universe of roughly 900 US large- and mid-cap stocks, a quantitative model determines holdings and weights by raising exposure to all five factors at the same time. The construction assumes that each factor cycle works in a complementary way across different market regimes.

• Pursuing five factors at once spreads the risk of concentrating in a single factor
• Expense ratio is low compared with the category average

Assets under management (AUM) stand at $3.6B, and the expense ratio is 0.08% per year.

It takes the same multifactor approach at a lower cost burden, making it an efficient choice for investors who want to reduce the cost of entry into factor investing.

Multifactor strategies tend to perform relatively well in growth-driven markets where the momentum and quality factors are favorable, while the low volatility factor can act as a buffer when volatility rises.

Inflows tend to increase when interest in factor investing is rising, and steady demand persists from investors who prefer the diversification benefits of multifactor funds over single-factor ETFs.

Its strengths are a low expense ratio and factor diversification, while its weakness is the uncertainty of factor premiums as markets change.

In the table, FNDX and FNDA are Fidelity's fundamental factor-weighted ETFs, and PRF is Invesco's flagship fundamental index large-cap ETF, each using a different factor methodology. RECS and JHMM also follow multifactor strategies, but they differ in issuer and index construction method. For investors who would rather pick individual factors directly than use a multifactor approach, MTUM for momentum, QUAL for quality, and USMV for low volatility are also worth considering as alternatives.

Here are the points to review before investing in LRGF. A multifactor strategy offers diversification benefits compared with a single factor, but it is important to check the factor composition, costs, and liquidity in advance.

During periods when factor premiums fail to materialize for a long time, underperformance relative to the market average can persist, and reliance on a quantitative model could lead to unexpected concentrations when market regimes shift.

It is an efficient choice for investors who want to implement a US equity multifactor strategy at a low expense ratio. If you prefer a single factor, you can compare it with MTUM, QUAL, and USMV, and if you prefer a similar factor-weighted approach, with FNDX and PRF.