Sizing Up a Distinctive Approach to Tilting Toward Smaller-Cap Stocks
This exchange-traded fund tilts toward smaller and more-defensive names in the large-cap universe.
In a crowded field, iShares MSCI USA Size Factor ETF (SIZE) offers a distinctive way to tilt toward smaller-cap stocks. It has almost no exposure to small-cap stocks. Instead, it tracks the MSCI USA Risk Weighted Index, which includes the same large- and mid-cap stocks as the broad MSCI USA Index. The risk-weighted benchmark reweights these stocks according to the inverse of their volatilities over the past three years, with a cap to improve diversification. This gives the least volatile stocks the largest weightings and skews the portfolio toward the smaller names in the MSCI USA Index.
The average market capitalization of the fund's holdings is only a third of the corresponding figure for the MSCI USA Index's, so its name is not a complete misnomer. That said, the fund's risk-weighting approach is a more important distinguishing characteristic than its market-cap orientation. It offers moderately defensive exposure to stocks at the smaller end of the large-cap spectrum for a reasonable 0.15% annual fee.
Alex Bryan has a position in the following securities mentioned above: USMV. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.