The recent rally by smaller stocks is reaching historic proportions and many market observers believe the move is far from over. The ERShares International Equity ETF (NYSEARCA: ERSX) stands out as an exchange traded fund to consider.

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.

“The Russell 2000 index is on track for its best month on record, and some of the exchange traded funds that track small cap stocks have matched or even exceeded the benchmark,” reports Jesse Pound for CNBC.

Why ERSX Is Exceedingly Relevant Today

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.

“Some small cap names that are favorites of hedge funds have beaten the index this year, but individual investors might feel more comfortable investing in broader exchange traded funds,” according to CNBC.

That said, 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

Based on measures such as return on equity measures, international SMID companies are higher quality. They have been trading on average at a 40% discount to US small- and mid-caps. Yet investors have not taken advantage of this opportunity.

Increasing the allure of ERSX, international small-caps are generally export-oriented, globally structured, innovative, and have a high to dominant share of a niche market, often one in which the U.S. counterparts don’t compete effectively.

In recent weeks, small cap equities have been keeping pace their large cap brethren, but before advisors start sticking their clients into these small cap funds, they might want to think twice. While it helps to diversify a client’s portfolio and get the additional upside of small caps, advisors should keep quality in mind.

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.