Launched on 12/30/2016, the ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) is a smart beta exchange traded fund offering 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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
OUSM is managed by Alps, and this fund has amassed over $881.29 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund seeks to match the performance of the FTSE Russell US Qual / Vol / Yield Factor 3% Capped Index before fees and expenses.
The OShares U.S. Small-Cap Quality Dividend Index is designed to reflect the performance of publicly-listed small-capitalization dividend-paying issuers in the United States exhibiting high quality, low volatility and high dividend yields.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.48% for OUSM, making it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 2.00%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 23.1% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, National Healthcare Corp. (NHC) accounts for about 2.97% of total assets, followed by Royalty Pharma Plc (RPRX) and Td Synnex Corp. (SNX).
The top 10 holdings account for about 23.66% of total assets under management.
Performance and Risk
The ETF has gained about 10.17% so far this year and it's up approximately 9.99% in the last one year (as of 07/06/2026). In the past 52-week period, it has traded between $42.12 and $47.75
The fund has a beta of 0.91 and standard deviation of 14.69% for the trailing three-year period. With about 109 holdings, it effectively diversifies company-specific risk .
Alternatives
ALPS O'Shares U.S. Small-Cap Quality Dividend 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 $82.25 billion in assets, iShares Core S&P Small-Cap ETF has $109.37 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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ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).