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Is iShares US SmallCap Equity Fac (SMLF) a Strong ETF Right Now?

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Launched on 04/28/2015, the iShares US SmallCap Equity Fac (SMLF - Free Report) is a smart beta exchange traded fund offering 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 work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

The fund is sponsored by Blackrock. It has amassed assets over $763.28 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 MSCI USA Small Cap Diversified Multiple-Factor Index.

The MSCI USA Small Cap Diversified Multiple-Factor Index is designed to select equity securities from MSCI USA Small Cap Index that have high exposure to four investment style factors: value, quality, momentum and low size.

Cost & Other Expenses

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.

SMLF's 12-month trailing dividend yield is 1.53%.

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.

For SMLF, it has heaviest allocation in the Industrials sector --about 18.60% of the portfolio --while Financials and Information Technology round out the top three.

Looking at individual holdings, Fair Isaac Corp (FICO - Free Report) accounts for about 0.72% of total assets, followed by First Industrial Realty Trust Inc (FR - Free Report) and Builders Firstsource Inc (BLDR - Free Report) .

The top 10 holdings account for about 5.94% of total assets under management.

Performance and Risk

So far this year, SMLF has added about 7.93%, and is up roughly 11.46% in the last one year (as of 09/20/2023). During this past 52-week period, the fund has traded between $44.10 and $56.62.

The fund has a beta of 1.11 and standard deviation of 21.86% for the trailing three-year period, which makes SMLF a high risk choice in this particular space. With about 883 holdings, it effectively diversifies company-specific risk.


IShares US SmallCap Equity Fac 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 Small-Cap ETF (IJR - Free Report) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $50.75 billion in assets, iShares Core S&P Small-Cap ETF has $68.12 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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