Cornerstone Investment Partners with AdvisorShares launched an actively managed small-capitalization exchange traded fund that could potentially capitalize on cheap valuations in small-cap stocks with improving fundamentals.
The AdvisorShares Cornerstone Small Cap ETF (NYSEArca: SCAP) is an actively managed ETF that will try to provide long-term capital appreciation and current income. SCAP comes with a 0.80% net expense ratio.
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Cornerstone Investment partners will act as the sub-advisor to the fund. The registered investment advisor uses an investment valuation model based on financial theory and strong statistical merit to identify stocks they it believes are undervalued, according to Cornerstone. They strive to provide outperformance while diminishing downside risk.
SCAP will target U.S. equities that are smaller than the largest components in the Russell 2000 index but will exclude the smallest 200 stocks of the benchmark. Moreover, securities are equally weighted within the sectors.
[related_stories]When weighting components, the Cornerstone team will select stocks based on three criteria: Analysts have positively revised their forward looking estimates of the company’s profitability and the company has generated earnings in excess of analyst expectations. Balance sheet strength. Lastly, financial flexibility, as determined by measuring a company’s ability to meet debt and capital expenditure requirements.
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“The Sub-Advisor’s investment philosophy is based on the view that the market often misprices fundamental improvements and is slow to recognize improving fundamentals, particularly in small cap stocks,” according to the prospectus.
SCAP will be competing against two other actively managed small-cap ETFs in the space, the AlphaMark Actively Managed Small Cap ETF (NasdaqGM: SMCP) and iShares Enhanced U.S. Small-Cap ETF (NYSEArca: IESM).
For more information on new fund products, visit our new ETFs category.