Should iShares U.S. Small-Cap Equity Factor ETF (SMLF) Be on Your Investing Radar?

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the iShares U.S. Small-Cap Equity Factor ETF (SMLF) is a passively managed exchange traded fund launched on 04/28/2015.

The fund is sponsored by Blackrock. It has amassed assets over $947.99 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

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even 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

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

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

It has a 12-month trailing dividend yield of 1.07%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 19.40% of the portfolio. Information Technology and Consumer Discretionary round out the top three.

Looking at individual holdings, Super Micro Computer Inc (SMCI) accounts for about 0.90% of total assets, followed by Builders Firstsource Inc (BLDR) and Deckers Outdoor Corp (DECK).

The top 10 holdings account for about 6.67% of total assets under management.

Performance and Risk

SMLF seeks to match the performance of the MSCI USA Small Cap Diversified Multiple-Factor Index before fees and expenses. The STOXX U.S. Small-Cap Equity Factor Index (USD) composed of U.S. small-capitalization stocks that have favourable exposure to target style factors subject to constraints.

The ETF has gained about 5.34% so far this year and is up roughly 17.65% in the last one year (as of 03/11/2024). In the past 52-week period, it has traded between $47.85 and $62.23.

The ETF has a beta of 1.10 and standard deviation of 21.48% for the trailing three-year period, making it a high risk choice in the space. With about 824 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Small-Cap Equity Factor 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, SMLF 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) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $62.67 billion in assets, iShares Core S&P Small-Cap ETF has $78 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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iShares U.S. Small-Cap Equity Factor ETF (SMLF): ETF Research Reports

Deckers Outdoor Corporation (DECK) : Free Stock Analysis Report

Builders FirstSource, Inc. (BLDR) : Free Stock Analysis Report

Super Micro Computer, Inc. (SMCI) : Free Stock Analysis Report

iShares Russell 2000 ETF (IWM): ETF Research Reports

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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