Looking for broad exposure to the Small Cap Growth segment of the US equity market? You should consider the Guggenheim S&P SmallCap 600 Pure Growth ETF (RZG), a passively managed exchange traded fund launched on 03/01/2006.
The fund is sponsored by Guggenheim Funds. It has amassed assets over $249.81 M, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Further, growth stocks have a higher level of volatility associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
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 0.35%, putting it on par with most peer products in the space.
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 Healthcare sector--about 26.30% of the portfolio. Information Technology and Consumer Discretionary round out the top three.
Looking at individual holdings, Qualys Inc (QLYS) accounts for about 1.55% of total assets, followed by Enanta Pharmaceuticals Inc (ENTA) and Brooks Automation Inc (BRKS).
The top 10 holdings account for about 14.04% of total assets under management.
Performance and Risk
RZG seeks to match the performance of the S&P SmallCap 600 Pure Growth Index before fees and expenses. The S&P SmallCap 600 Pure Growth Index is narrow in focus, containing only those S&P SmallCap 600 companies with strong growth characteristics as selected by Standard & Poors. As of December 31, 2010 the Index includes approximately 160 of the constituents that comprise the S&P SmallCap 600.
The ETF has added about 0.74% so far this year and was up about 17.60% in the last one year (as of 04/06/2018). In the past 52-week period, it has traded between $96.71 and $120.79.
The ETF has a beta of 1.09 and standard deviation of 17.37% for the trailing three-year period, making it a high risk choice in the space. With about 143 holdings, it effectively diversifies company-specific risk.
Guggenheim S&P SmallCap 600 Pure Growth 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, RZG is a good option for those seeking exposure to the Small Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Small-Cap Growth ETF (VBK) and the iShares Russell 2000 Growth ETF (IWO) track a similar index. While Vanguard Small-Cap Growth ETF has $7.31 B in assets, iShares Russell 2000 Growth ETF has $8.93 B. VBK has an expense ratio of 0.07% and IWO charges 0.24%.
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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Brooks Automation, Inc. (BRKS) : Free Stock Analysis Report
Qualys, Inc. (QLYS) : Free Stock Analysis Report
ISHARS-RS 2K GR (IWO): ETF Research Reports
GUGG-SP 600 PG (RZG): ETF Research Reports
VIPERS-SC GRWTH (VBK): ETF Research Reports
Enanta Pharmaceuticals, Inc. (ENTA) : Free Stock Analysis Report
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