Smart Beta ETFs Need Not Be Expensive | ETF Trends

Getting smart beta exposure doesn’t need to be an expensive proposition with funds like the IQ Chaikin U.S. Small Cap ETF (CSML).

The fund seeks investment results that track the price and yield performance of its underlying index, the Nasdaq Chaikin Power US Small Cap Index. The fund invests at least 80% of the value of its assets (net assets plus the amount of any borrowings for investment purposes) in securities of small-capitalization U.S. issuers.

The underlying index applies the Chaikin Power Gauge®, a quantitative multi-factor model that seeks to identify securities that are expected to outperform peers, to select securities from the Nasdaq US 1500 Index. Given its robust factor feature, the ETF’s expense ratio comes in at just 0.35%, which is 24 basis points lower than its category average.

Features of CSML:

  1. Smart Beta Core Equity: Seeks to take advantage of opportunities in small cap equities, utilizing the Chaikin Power Gauge rating to identify top equity prospects.
  2. Chaikin Power Gauge Advantage: Combines fundamentals and technicals to simplify stock selection.
  3. Proven Multi-Factor Approach: Powerful 20-factor model that uses a systematized rule set to provide a unique blend of active and passive advantages.

CSML Chart

A Skew Toward Value Benefiting Small Caps

While small cap equities are typically associated with growth opportunities, the dynamic is starting to change. As more investors are starting to favor value, they’re also picking up small cap funds in the process.

“The flip that we’ve seen where some of the small-cap or mid-cap value plays have started to catch investor attention means a lot of those individual stocks are now showing up in momentum ETFs and funds. That’s going to really change the dynamics here,” said Dave Nadig, chief investment officer and director of research at ETF Trends on CNBC’s “ETF Edge.”

“I think we are in a bit of a rotation,” he added. “A lot of it is because there’s no alternative market. Investors and advisors are really sticking to the equity markets.”

Indeed, small caps have been outpacing their large cap brethren so far this year. The Russell 2000 is up 13% for the year while the S&P 500 is up 11%.

^RUT Chart

For more news, information, and strategy, visit the Alternatives Channel.