The iShares U.S. Small-Cap Equity Factor ETF (SMLF) made its debut on 04/28/2015, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Blackrock, SMLF has amassed assets over $4.18 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA Small Cap Diversified Multiple-Factor Index.
The STOXX U.S. Small-Cap Equity Factor Index (USD) composed of U.S. small-capitalization stocks that have favourable exposure to target style factors subject to constraints.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.
The fund has a 12-month trailing dividend yield of 0.99%.
Sector Exposure and Top Holdings
While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Industrials sector - about 19.5% of the portfolio. Information Technology and Financials round out the top three.
Taking into account individual holdings, Emcor Group Inc (EME) accounts for about 1.23% of the fund's total assets, followed by Blk Csh Fnd Treasury Sl Agency (XTSLA) and Nvent Electric Plc (NVT).
Performance and Risk
So far this year, SMLF has gained about 19.58%, and is up about 32.48% in the last one year (as of 07/01/2026). During this past 52-week period, the fund has traded between $68.27 and $89.14.
SMLF has a beta of 1.08 and standard deviation of 19.49% for the trailing three-year period, which makes the fund a high risk choice in the space. With about 919 holdings, it effectively diversifies company-specific risk .
Alternatives
iShares U.S. Small-Cap Equity Factor ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. iShares Russell 2000 ETF has $83.67 billion in assets, iShares Core S&P Small-Cap ETF has $111.15 billion. IWM has an expense ratio of 0.19% and IJR changes 0.06%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Blend
Bottom Line
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iShares U.S. Small-Cap Equity Factor ETF (SMLF): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).