Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) is a passively managed exchange traded fund launched on December 30, 2016.
The fund is sponsored by Alps. It has amassed assets over $794.96 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.
Typically holding a combination of both growth and value stocks, blend ETFs also demonstrate qualities seen in value and growth investments.
Costs
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 counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.48%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 2.07%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Industrials sector -- about 24.7% of the portfolio. Financials and Consumer Discretionary round out the top three.
Looking at individual holdings, Chemed Corp. (CHE) accounts for about 2.36% of total assets, followed by Sei Investments Co. (SEIC) and Essent Group Ltd. (ESNT).
The top 10 holdings account for about 21.74% of total assets under management.
Performance and Risk
OUSM 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.
The ETF has added roughly 8.36% so far this year and it's up approximately 7.4% in the last one year (as of 09/28/2026). In the past 52-week period, it has traded between $42.12 and $50.36.
The ETF has a beta of 0.90 and standard deviation of 14.78% for the trailing three-year period. With about 108 holdings, it effectively diversifies company-specific risk.
Alternatives
ALPS O'Shares U.S. Small-Cap Quality Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, OUSM is a good option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Morningstar Small-Cap ETF (VB) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While Vanguard Morningstar Small-Cap ETF has $78.26 billion in assets, iShares Core S&P Small-Cap ETF has $104.73 billion. VB has an expense ratio of 0.03% and IJR charges 0.06%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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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).