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Should iShares Morningstar SmallCap ETF (ISCB) Be on Your Investing Radar?

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Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the iShares Morningstar SmallCap ETF (ISCB - Free Report) is a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $214.78 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.

Why Small Cap Blend

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.

Costs

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

Annual operating expenses for this ETF are 0.04%, making it the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.51%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 17.30% of the portfolio. Industrials and Healthcare round out the top three.

Looking at individual holdings, Biohaven Pharmaceutical Holding Co (BHVN - Free Report) accounts for about 0.27% of total assets, followed by Caseys General Stores Inc (CASY - Free Report) and Wex Inc (WEX - Free Report) .

The top 10 holdings account for about 2.18% of total assets under management.

Performance and Risk

ISCB seeks to match the performance of the MORNINGSTAR US SMALL CAP EXTENDED INDEX before fees and expenses. The Morningstar US Small Cap Extended Index comprises of small-capitalization U.S. equities.

The ETF has lost about -15.46% so far this year and is down about -15.03% in the last one year (as of 08/30/2022). In the past 52-week period, it has traded between $42.80 and $61.66.

The ETF has a beta of 1.16 and standard deviation of 30.90% for the trailing three-year period. With about 1924 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar SmallCap ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, ISCB is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P SmallCap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $54.63 billion in assets, iShares Core S&P SmallCap ETF has $67.54 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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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