VanEck today announced the launch of the VanEck Morningstar SMID Moat ETF (CBOE: SMOT), the newest addition to the firm’s lineup of “moat”-focused equity funds.
SMOT is designed to provide investors with exposure to attractively priced U.S. small- and mid-cap (SMID-cap) companies that Morningstar believes possess long-term competitive advantages.
“Launching SMOT is an exciting natural progression for us as we continue to build out our moat-focused fund family,” said Brandon Rakszawski, director of product management with VanEck, in a news release. “The flagship fund of this suite, the VanEck Morningstar Wide Moat ETF (MOAT), has attracted significant investment since its inception in 2012, driven in large part by the long-term success of its investment strategy. We’re very pleased to be adding a SMID-cap offering built around the same industry-leading research from Morningstar.”
SMOT seeks to track the Morningstar US Small-Mid Cap Moat Focus Index, which targets a select group of at least 75 small- and mid-cap companies with moats that are trading at attractive valuations, according to Morningstar’s equity research team. VanEck noted that the large universe of SMID-cap companies has considerably less analyst coverage than their large-cap counterparts, creating dispersion between stock prices and fair value. This dynamic reinforces the value of an index that draws on the collective insights of Morningstar’s equity research team.
“SMID-cap stocks are an attractive segment of the U.S. equity market, as they’ve historically provided greater return potential than large caps. We’re currently seeing SMID-cap valuations at a 20-year low, relative to their large-cap counterparts, offering investors a timely and attractive entry point,” added Rakszawski. “The key with this category is to approach it through a research-driven lens as the dispersions in performance, valuations and more can be stark. That is why we’re so pleased to continue our collaboration with Morningstar on these efforts, and why we see SMOT as a highly differentiated vehicle through which to add exposure to this category.”
Amelia Furr, global head of sales for Morningstar Indexes, added in the release: “This is a great opportunity to build on our longstanding and successful collaboration with VanEck, while extending the Moat index franchise. Similar in approach to our highly successful Morningstar Wide Moat Focus Index, the Morningstar U.S. Small-Mid Cap Moat Focus Index taps into the collective insights of the Morningstar Equity Research team to provide exposure to small- and mid-cap companies with strong Morningstar Economic Moat Ratings that are trading at relatively low current market price to fair value estimates.”
SMOT joins a suite of moat investing ETFs from VanEck that includes the $5.9 billion (as of September 30) VanEck Morningstar Wide Moat ETF (MOAT), the international equity-focused VanEck Morningstar International Moat ETF (MOTI), the VanEck Morningstar Global Wide Moat ETF (MOTG), and the VanEck Morningstar ESG Moat ETF (MOTE).
The VanEck and Morningstar teams provide regular updates and insights on their moat equity research and moat-style investing.
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