Halftime in 2025 threw a spotlight on active small- and midcap funds via the SPIVA U.S. Mid-Year 2025 report. The trend of active ETF launches is outpacing their passive peers this year. That opens the field for investment opportunities in active funds that cater to small- and midcap exposure, as well as those offering a combination of both.
Compared to their large-cap counterparts, active managers in the small- and midcap equities universe fared better in their performance versus the associated S&P index benchmarks. This could largely be attributed to the disparity in performance between the S&P 500 versus its small- and midcap indexes. The SPIVA report noted a “6% performance differential between The 500 and the S&P MidCap 400, and a 10% differential between The 500 and the S&P SmallCap 600.”
Given this, small- and midcap managers were able to exhibit strong performance midway through 2025 as “only 25% of All Mid-Cap funds and only 22% of All Small-Cap funds underperformed to the year’s mid-point.” Small cap managers are churning out better performance numbers this year versus last year. In 2024, 30% underperformed the small-cap index.
That said, it’s an opportune time to get small- and midcap exposure. That’s especially so if forthcoming rate cuts can turbocharge their performance through the rest of the year and beyond.
ETF Options Aplenty in 2025
The small- and midcap equity universe can be best encapsulated in an investment vehicle that offers a high degree of flexible exposure — ETFs. With an active strategy added, that flexibility is maximized even further. With that, there are myriad active options from various providers.
For core small-cap exposure, consider funds like the Fidelity Enhanced Small Cap ETF (FESM), the JPMorgan Active Small Cap Value ETF (JPSV), and the First Trust Active Factor Small Cap ETF (AFSM). For midcaps specifically, take a look at the Fidelity Enhanced Mid Cap ETF (FMDE), the Alger Mid Cap 40 ETF (FRTY), and the Janus Henderson Mid Cap Growth Alpha ETF (JMID).
Those looking for single-factor tilts also have a surplus of options. For example, value seekers in small-caps may want to look at the JPMorgan Active Small Cap Value ETF (JPSV). Looking for midcap companies exhibiting growth? Then the Motley Fool Mid-Cap Growth ETF (TMFM) might be what you seek.
Best of Both Worlds
With so many options to consider, it can be difficult to decide where to allocate exposure. Those looking to balance the more stable midcaps with the growth potency of small-caps can have the best of both worlds — ETFs that meld exposure to both.
Funds to look at include the once-passive, now-active Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD), the JPMorgan Small & Mid Cap Enhanced Equity ETF (JMEE), and the T. Rowe Price Small-Mid Cap ETF (TMSL).
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