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The iShares MSCI USA SmallCap Multifactor ETF (SMLF - Free Report) was launched on 04/28/2015 and is a passively managed exchange-traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Blackrock. It has amassed assets of over $974.18 million, making it one of the larger 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 their large and mid-cap counterparts but come with higher risks.

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

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are 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 1.22%.
 

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.

This ETF has the heaviest allocation to the Information Technology sector--about 19.30% of the portfolio. Healthcare and Financials round out the top three.

Looking at individual holdings, Ovintiv Inc (OVV - Free Report) accounts for about 1.28% of total assets, followed by United Therapeutics Corp (UTHR - Free Report) and Jones Lang Lasalle Inc (JLL - Free Report).

The top 10 holdings account for about 3.33% 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 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.

The ETF has lost about -12.42% so far this year and is down about -10.58% in the last year (as of 12/26/2022). In the past 52-week period, it has traded between $44.10 and $57.97.

The ETF has a beta of 1.09 and a standard deviation of 29.39% for the trailing three-year period, making it a high-risk choice in the space. With about 504 holdings, it effectively diversifies company-specific risk.
 

Alternatives

IShares MSCI USA SmallCap Multifactor 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 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 iShares Russell 2000 ETF (IWM - Free Report) and the iShares Core S&P SmallCap ETF (IJR - Free Report) track a similar index. While iShares Russell 2000 ETF has $53.05 billion in assets, iShares Core S&P SmallCap ETF has $65.03 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 kinds of funds are also excellent vehicles for long-term investors.

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