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Different Starts For These New Small-Cap ETFs

Different Starts For These New Small-Cap ETFs

By most accounts, 2017 has been a banner year for the exchange traded funds industry. In the U.S., by far the world's largest ETF market, hundreds of new products have come to market, and ETFs have pulled in more than $400 billion, easily topping previous annual inflow records.

As is the case with each year's crop of new ETFs, some of 2017's rookie ETFs are off to impressive starts while others are still waiting for investor attention. That dichotomy is evident with a pair of newly minted small-cap ETFs.

Following its May launch, the IQ Chaikin US Small Cap ETF (NASDAQ: CSML) is off to a solid start as highlighted by its more than $300 million in assets under management. CSML's quick start is all the more impressive when considering the ETF entered a crowded and growing field of smart beta small-cap funds.

What The Experts Say

"While there are many multi-factor ETFs combining fundamental and technical screens, the quantitative model behind CSML has 20 inputs,” Todd Rosenbluth, CFRA Research's director of ETF and mutual fund research, said in a Monday note. “These are broken into value, growth, technical and sentiment components.”

CSML tracks the NASDAQ Chaikin Power US Small Cap Index and charges 0.35 percent per year, or $35 on a $10,000 investment. At the end of the third quarter, CSML was home to about 230 stocks, over 53 percent of which hailed from the financial services and industrial sectors.

Technology and consumer services names combined for 24.6 percent of the fund's weight. CSML has returned just over 10 percent since coming to market.

Waiting On Goldman

On the other hand, the Goldman Sachs ActiveBeta US Small Cap Equity ETF(NYSE: GSCC) is off to a slower start. GSSC has just $8 million in assets under management following its June debut, but if history is any guide with Goldman Sachs ETFs, GSSC will eventually find a following with investors.

As Rosenbluth points out, GSCC's large-cap counterpart, the Goldman Sachs ActiveBeta US Large Cap Equity ETF (NYSE: GSLC), is barely more than two years old and has $2.6 billion in assets under management.

"GSCC follows a similar equal-weighted factor approach as GSLC focused on value, momentum, quality and low volatility, but implemented using small companies,” said Rosenbluth. “GSCC has a 0.20 percent expense ratio, modest for any ETF and especially a small-cap smart-beta offering.”

CFRA has an Overweight rating on CSML and a Marketweight rating on GSCC.

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