Is iShares US SmallCap Equity Fac (SMLF) a Strong ETF Right Now?
The iShares US SmallCap Equity Fac (SMLF) was launched on 04/28/2015, 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?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
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.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as 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
Managed by Blackrock, SMLF has amassed assets over $939.25 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund seeks to match the performance of the MSCI USA Small Cap Diversified Multiple-Factor Index before fees and expenses.
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
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.
Operating expenses on an annual basis are 0.15% for this ETF, which makes it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.22%.
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.
SMLF's heaviest allocation is in the Healthcare sector, which is about 18.30% of the portfolio. Its Information Technology and Industrials round out the top three.
When you look at individual holdings, United Therapeutics Corp (UTHR) accounts for about 1.39% of the fund's total assets, followed by Jabil Inc (JBL) and Unum (UNM).
Performance and Risk
The ETF has gained about 0.60% so far this year and is down about -6.94% in the last one year (as of 03/17/2023). In the past 52-week period, it has traded between $44.10 and $56.40.
The ETF has a beta of 1.10 and standard deviation of 26.79% for the trailing three-year period, making it a high risk choice in the space. With about 562 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) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $50.46 billion in assets, iShares Core S&P Small-Cap ETF has $66.82 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.
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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iShares US SmallCap Equity Fac (SMLF): ETF Research Reports
United Therapeutics Corporation (UTHR) : Free Stock Analysis Report
Unum Group (UNM) : Free Stock Analysis Report
Jabil, Inc. (JBL) : Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
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