Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the Invesco S&P SmallCap Quality ETF (XSHQ Quick QuoteXSHQ - Free Report) is a passively managed exchange traded fund launched on April 6, 2017.

The fund is sponsored by Invesco. It has amassed assets over $306.62 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

Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.

Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.

Costs

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

Annual operating expenses for this ETF are 0.29%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.25%.

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 Industrials sector -- about 25.1% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Sterling Infrastructure Inc (STRL) accounts for about 2.44% of total assets, followed by Armstrong World Industries Inc (AWI) and Brinker International Inc (EAT).

The top 10 holdings account for about 20.69% of total assets under management.

Performance and Risk

XSHQ seeks to match the performance of the SmallCap 600 Quality Index before fees and expenses. The S&P SmallCap 600 Quality Index is composed of 120 securities in the S&P SmallCap 600 Index that have the highest quality score, which is calculated based on the average of three fundamental measures: return on equity, accruals ratio and financial leverage ratio.

The ETF has lost about 1.19% so far this year and is up roughly 6.69% in the last one year (as of 08/08/2025). In the past 52-week period, it has traded between $34.34 and $47.59.

The ETF has a beta of 0.98 and standard deviation of 21.3% for the trailing three-year period. With about 122 holdings, it effectively diversifies company-specific risk.

Alternatives

Invesco S&P SmallCap Quality 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, XSHQ is a sufficient 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 Vanguard Small-Cap ETF (VB) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While Vanguard Small-Cap ETF has $63.09 billion in assets, iShares Core S&P Small-Cap ETF has $80.19 billion. VB has an expense ratio of 0.05% and IJR charges 0.06%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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.