Many exchange traded funds check one box. Some check several. One that checks many relevant themes is the ERShares NextGen Entrepreneurs ETF (ERSX).

ERSX selects the most entrepreneurial, primarily Non-US Small Cap companies, that meet the thresholds embedded in its proprietary Entrepreneur Factor (EF). ERShares’ ETF delivers compelling 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.

Year-to-date, entrepreneurial companies are market leaders. That’s obviously one trait in favor of ERSX, but there’s more to the story.

ERSX isn’t any old small cap ETF. It blends domestic and international exposure, which is relevant at time when many markets are betting international smaller stocks will top U.S. equivalents. Non-U.S. equities are poised to take flight, and it’s possible that this asset class is in for a substantial period of out-performance.

ERSX 1 Year Performance

More Reasons to Embrace ERSX

U.S. small- and mid-caps have it easier than their international peers. Smaller U.S. companies benefit from operating in one of the easiest countries for commerce. The United States regularly places near the top in the World Bank’s annual rankings of countries for its ease of doing business. The companies have access to a population of 330 million consumers who principally speak one language, and they operate one set of national laws and regulations.

Small cap companies typically show an advantage over large- and mid-cap stocks during the initial stages of an economic expansion phase. Small cap stock performances are more correlated with U.S. GDP, so their financial performance may be more aligned with the initial U.S. economic expansion period.

The ERSX ETF tracks a fundamental-selected index of global small cap ex-US equities weighted by market capitalization. The fund’s index is benchmarked against the FTSE All-World Ex-US Small Cap Index, a market-capitalization weighted index representing small cap stocks’ performance in developed and emerging markets excluding the United States. The index is derived from the FTSE Global Equity Index Series (GEIS), which covers 98% of the world’s investable market capitalization

On measures such as return on equity measures, international small- and mid-sized (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.

For more investing ideas, 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.