Launched on 09/21/2016, the Principal U.S. Small Cap Index ETF (PSC - Free Report) is a passively managed exchange-traded fund designed to provide a broad exposure to the Small Cap Blend segment of the US equity market.

The fund is sponsored by Principal Funds. It has amassed assets over $370.21 M, 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

Small cap companies have a market capitalization below $2 billion. They usually have higher potential than large and mid-cap companies with stocks but higher risk.

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

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 0.38%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.91%.

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 Financials sector--about 20.90% of the portfolio. Consumer Discretionary and Information Technology round out the top three.

Looking at individual holdings, Pbf Energy Inc Class A Common Stock Usd.001 (PBF - Free Report) accounts for about 0.80% of total assets, followed by Centerstate Bank Corp Common Stock Usd.01 (CSFL - Free Report) and Allete Inc Common Stock (ALE - Free Report).

The top 10 holdings account for about 7.39% of total assets under management.

Performance and Risk

PSC seeks to match the performance of the NASDAQ U.S. Small Cap Select Leaders Index before fees and expenses. The NASDAQ U.S. Small Cap Select Leaders Index provides exposure to equity securities of U.S. small-capitalization companies that exhibit high degrees of sustainable shareholder yield, pricing power, and strong momentum.

The ETF has added about 2.68% so far this year and was up about 15.04% in the last one year (as of 05/17/2018). In the past 52-week period, it has traded between $27.61 and $32.76.

With about 465 holdings, it effectively diversifies company-specific risk.

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.