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Is IQ Chaikin U.S. Small Cap ETF (CSML) a Strong ETF Right Now?

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Designed to provide broad exposure to the Style Box - Small Cap Blend category of the market, the IQ Chaikin U.S. Small Cap ETF (CSML - Free Report) is a smart beta exchange traded fund launched on 05/16/2017.

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.

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.

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other 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

Managed by New York Life Investments, CSML has amassed assets over $202.68 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, this particular fund seeks to match the performance of the NASDAQ Chaikin Power US Small Cap Index.

The NASDAQ Chaikin Power US Small Cap Index is a rules-based, quantitative index designed to enhance the NASDAQ US 1500 Index, by selecting stocks with the highest Chaikin Power Gauge rating.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for CSML are 0.35%, which makes it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 1.65%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

CSML's heaviest allocation is in the Financials sector, which is about 26.90% of the portfolio. Its Industrials and Information Technology round out the top three.

Looking at individual holdings, Dillards Inc-Cl A (DDS - Free Report) accounts for about 0.62% of total assets, followed by Kezar Life Sciences Inc (KZR - Free Report) and Liquidia Corp (LQDA - Free Report) .

The top 10 holdings account for about 4.6% of total assets under management.

Performance and Risk

Year-to-date, the IQ Chaikin U.S. Small Cap ETF has lost about -10.18% so far, and is down about -6.87% over the last 12 months (as of 06/03/2022). CSML has traded between $30.22 and $38.36 in this past 52-week period.

CSML has a beta of 1.26 and standard deviation of 31.22% for the trailing three-year period. With about 480 holdings, it effectively diversifies company-specific risk.


IQ Chaikin U.S. 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 - 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 $55.57 billion in assets, iShares Core S&P SmallCap ETF has $66.59 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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