IJR is a member of the growing iShares core lineup aimed at cost-conscious investors. The ETF charges 0.12%, which is toward the lower end of the expense ratios found on small-cap funds. SLY charges 0.15% per year. [Return of Small-Cap ETFs]
Sector considerations are also important when evaluating small-cap ETFs. For example, IWM allocates 23.6% of its weight to financials and 17.8% to technology names. The health care and consumer discretionary sectors combine for 29.5% of the ETF’s weight.
IJR’s financial services weight is comparable to IWM’s at 23.2%, but the former’s tech is 16.9%. Discretionary and health care combine for 27.4% of IJR’s weight.
“These allocations have, in our view, impacted performance. IWM has a higher three-year standard deviation of 13.0 and beta vs. the S&P 500 Index of 1.17 than IJR (12.3 and 1.2). Looking at recent calendar years, IWM underperformed IJR by 269 basis points in 2013, but outperformed by 70 basis points in 2012,” according to S&P Capital IQ.
iShares Core S&P Small-Cap ETF
Tom Lydon’s clients own shares of IWM.