The low-volatility factor, on the other hand, has fallen behind due to concerns over rising rates and the ongoing shift toward growth names. The low-vol factor, though, is now much cheaper on a P/E ratio basis than it was a year ago and relatively cheap when compared to the broader market.
Its mutli-factor approach enables DESC to be a broad-based fund with nearly 1,500 holdings, none of which exceed weights of 0.76%.
While small-caps have outperformed and continued to attract investment interest, some analysts warned that the strong corporate earnings and economic data could conceal tariff’s potential negative impact on small businesses.
DESC’s largest sector weight is financial services at nearly 28%. At the small-cap level, financials are mostly domestic plays with little vulnerability to international trade wars.
For more information on factor-based investments, visit our smart beta category.