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Is Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) a Strong ETF Right Now?

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The Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC - Free Report) was launched on 06/28/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - Small Cap Blend 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.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Goldman Sachs Funds. It has amassed assets over $479.95 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, GSSC seeks to match the performance of the Goldman Sachs ActiveBeta U.S. Small Cap Equity Index.

The Goldman Sachs ActiveBeta U.S. Small Cap Equity Index is designed to deliver exposure to equity securities of small capitalization U.S. issuers.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for GSSC are 0.20%, which makes it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 17.90% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Information Technology round out the top three.

Looking at individual holdings, Dec 21 Cme Eminirus2k (RTYZ1) accounts for about 0.64% of total assets, followed by Crocs Inc (CROX - Free Report) and Lattice Semiconductor Corp (LSCC - Free Report) .

The top 10 holdings account for about 3.53% of total assets under management.

Performance and Risk

Year-to-date, the Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF has gained about 25.50% so far, and was up about 25.38% over the last 12 months (as of 12/30/2021). GSSC has traded between $53.65 and $70.38 in this past 52-week period.

The fund has a beta of 0.95 and standard deviation of 28.04% for the trailing three-year period. With about 1389 holdings, it effectively diversifies company-specific risk.

Alternatives

Goldman Sachs ActiveBeta U.S. Small Cap Equity 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 - Free Report) tracks Russell 2000 Index and the iShares Core S&P SmallCap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $70.43 billion in assets, iShares Core S&P SmallCap ETF has $75.66 billion. IWM has an expense ratio of 0.19% and IJR charges 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

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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