Launched on 07/08/2013, the SPDR Portfolio S&P 600 Small Cap ETF (SPSM) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Blend segment of the US equity market.
The fund is sponsored by State Street Global Advisors. It has amassed assets over $3.87 billion, making it one of the larger ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
There’s a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.05%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 1.67%.
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 to the Financials sector–about 18.80% of the portfolio. Industrials and Information Technology round out the top three.
Looking at individual holdings, Omnicell Inc. (OMCL) accounts for about 0.59% of total assets, followed by Matador Resources Company (MTDR) and Southwestern Energy Company (SWN).
The top 10 holdings account for about 4.75% of total assets under management.
Performance and Risk
SPSM seeks to match the performance of the Russell 2000 Index before fees and expenses. The S&P SmallCap 600 Index is designed to measure the performance of the small-capitalization segment of the U.S. equity market.
The ETF has lost about -22.26% so far this year and is down about -16.37% in the last one year (as of 06/21/2022). In the past 52-week period, it has traded between $34.83 and $46.94.
The ETF has a beta of 1.14 and standard deviation of 30.59% for the trailing three-year period. With about 616 holdings, it effectively diversifies company-specific risk.
SPDR Portfolio S&P 600 Small Cap ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, SPSM is an outstanding option for investors seeking exposure to the Style Box – Small Cap Blend segment of the market. There are other additional ETFs in the space that investors could consider as well.
The iShares Russell 2000 ETF (IWM) and the iShares Core S&P SmallCap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $51.60 billion in assets, iShares Core S&P SmallCap ETF has $57.98 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
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.