The small-cap exchange traded fund (ETF) as an asset class has had a successful decade, while proving that the little guy can come out on top in any climate.

No asset class has been spared in this bear market, but over the long-term, small-cap funds have performed slightly better than their mid- and large-cap brethren. One typically expects small-caps to get pummeled, since they have less diversified revenue resources, are not as globally diversified and have a harder time generating capital, explains Kyle Waller for Seeking Alpha.

Performance has not been consistent, however, as three different ETFs from the same asset class vary widely:

  • iShares S&P Small Cap 600 Index (IJR): down 33.7% year-to-date; 19.1% financials; 16.9% industrial materials

Small Cap ETFs

  • Vanguard Small Cap (VB): down 38.4% year-to-date; 17.3% financials; 16.2% industrial materials

Vanguard Small-Cap ETF

  • iShares Russell 2000 Index (IWM): down 35.7% year-to-date; 21.6% financials; 14.5% industrial materials

Russell 2000 Small-Cap ETF

All three funds are constructed and weighted differently; companies in IJR have to be trading at least 12 months, with four straight profitable quarters and be tested for liquidity before inclusion. VB and IWM have a more passive index methodology approach.

While small-caps haven’t been spared in the turmoil, we expect them to bounce back from a downturn better than most because their small size makes them more nimble and resilient in a market recovery.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.