Go Where They Aren't: International Small-Cap ETFs | ETF Trends

Domestic small-cap stocks are getting plenty of attention as of late, but investors shouldn’t gloss over international equivalents. That promising exposure can be obtained via exchange traded funds such as the ERShares International Equity ETF (NYSEARCA: ERSX).

The ERShares ETF selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers strong performance across a variety of investment strategies without disrupting investors’ underlying risk profile metrics. Their geographic diversity enables them to harness global advantages through additional returns associated with currency fluctuations, strategic geographic allocations, comparative trade imbalances, and relative supply/demand strengths.

“Investors who ignore international small-cap stocks in their global allocation may be doing so at the cost of risk-adjusted performance. Canterbury believes that a current opportunity exists in the asset class due to its attractive return potential and diversification benefits,” according to Canterbury Consulting.

International Names, Investment Gains

ERSX tracks 50 non-U.S. companies from around the world with market capitalizations between $300 million and $5 billion USD and the highest rank based on the six investment style factors. ERSX provides a platform for investors to access an often overlooked asset class.

“Only around 2 percent of mutual fund assets in the U.S. are invested in international small- and mid-cap stocks, while 7 percent of assets are invested in U.S. small-cap stocks. However, there are more than twice as many international small-cap stocks, accounting for more than double the overall market value compared to U.S. small-cap stocks,” notes Canterbury Consulting.

ERSX offers a focused approach to small-cap equities, one that includes international names. That’s a prime advantage as many competing funds are U.S.-only products.

ERSX YTD Performance

“A key reason why international small-cap stocks appear attractive to us is that they have historically provided higher returns than all other major equity asset classes over 10-year time periods,” according to Canterbury.

For more on entrepreneurial strategies, visit our Entrepreneur ETF Channel.

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.