Is iShares MSCI USA SmallCap Multifactor ETF (SMLF) a Strong ETF Right Now?
Smart Beta ETF report for SMLF
The iShares MSCI USA SmallCap Multifactor ETF (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?
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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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
The fund is sponsored by Blackrock. It has amassed assets over $1.13 billion, making it one of the average sized ETFs in the Style Box - Small Cap Blend. Before fees and expenses, SMLF 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
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for SMLF are 0.30%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.07%.
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.
Representing 19.10% of the portfolio, the fund has heaviest allocation to the Healthcare sector; Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Williams Sonoma Inc (WSM) accounts for about 1.31% of total assets, followed by Deckers Outdoor Corp (DECK) and Quanta Services Inc (PWR).
The top 10 holdings account for about 9.92% of total assets under management.
Performance and Risk
Year-to-date, the iShares MSCI USA SmallCap Multifactor ETF has gained about 28.39% so far, and was up about 28.17% over the last 12 months (as of 12/30/2021). SMLF has traded between $45.27 and $59.93 in this past 52-week period.
The fund has a beta of 1.11 and standard deviation of 26.81% for the trailing three-year period, which makes SMLF a high risk choice in this particular space. With about 489 holdings, it effectively diversifies company-specific risk.
IShares MSCI USA SmallCap Multifactor 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) tracks Russell 2000 Index and the iShares Core S&P SmallCap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $70.43 billion in assets, iShares Core S&P SmallCap ETF has $75.66 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 MSCI USA SmallCap Multifactor ETF (SMLF): ETF Research Reports
Quanta Services, Inc. (PWR): Free Stock Analysis Report
Deckers Outdoor Corporation (DECK): Free Stock Analysis Report
WilliamsSonoma, Inc. (WSM): Free Stock Analysis Report
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
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