Getting small cap exposure is a must nowadays, but sifting through the Russell 2000 to find a mix of quality and value is not an efficient way to do things. The Legg Mason Small-Cap Quality Value ETF (SQLV) does it all in a single fund.

SQLV seeks to track the investment results of an index composed of equity securities of small-capitalization companies that are traded in the United States. The fund seeks to track the investment results of the Royce Small-Cap Quality Value Index.

The underlying index utilizes a proprietary methodology created and sponsored by the fund’s subadvisor. The subadvisor is affiliated with both LMPFA and the fund. The fund will invest at least 80% of its net assets, plus borrowings for investment purposes, if any, in securities that compose its underlying index.

Fund features, per the Legg Mason website:

  • A focus on high quality, U.S.-traded small cap stocks with relatively low valuations.
  • A proprietary, multi-factor scoring system that emphasizes high profitability companies (quality) selling at attractive valuations (value)
  • Thoughtful combinations of strategic factors based on decades of insights from highly-regarded small cap practitioners.

SQLV Chart

Sidestepping Small Cap Risk

Quality and value are key factors in helping to smooth out the volatility that can come with small cap equities.

“They can be riskier than investing in huge companies, but shares typically cost less, and the reward can also be higher,” an InvestorPlace article said. “Because they are smaller, these are companies that have significant growth potential.”

“When the economy grows, small-cap stocks tend to perform better than larger stocks,” the article added. “With the U.S. economy starting to rev its engine as Covid-19 vaccines roll out, now is a great time to consider thinking small for big gains. Here are eight companies with plenty of cred you should be looking at.”

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