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Should IQ Chaikin U.S. Small Cap ETF (CSML) Be on Your Investing Radar?

Zacks Equity Research

Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the IQ Chaikin U.S. Small Cap ETF (CSML) is a passively managed exchange traded fund launched on 05/16/2017.

The fund is sponsored by Indexiq. It has amassed assets over $351.57 M, 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.

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.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.13%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 26.80% of the portfolio. Information Technology and Financials round out the top three.

Looking at individual holdings, Vectrus Inc (VEC) accounts for about 0.65% of total assets, followed by Global Brass & Copper Holdings Inc (BRSS) and Patrick Industries Inc (PATK).

The top 10 holdings account for about 5.5% of total assets under management.

Performance and Risk

CSML seeks to match the performance of the NASDAQ Chaikin Power US Small Cap Index before fees and expenses. The NASDAQ Chaikin Power US Small Cap Index is a rules-based, quantitative index designed to enhance the NASDAQ US 1500 Index, by selecting stocks with the highest Chaikin Power Gauge rating.

The ETF return is roughly 16.34% so far this year and is down about -5.49% in the last one year (as of 04/25/2019). In the past 52-week period, it has traded between $21.19 and $29.80.

The ETF has a beta of 1.23 and standard deviation of 16.09% for the trailing three-year period. With about 217 holdings, it effectively diversifies company-specific risk.

Alternatives

IQ Chaikin U.S. Small Cap 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, CSML 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 iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $43.19 B in assets, iShares Core S&P Small-Cap ETF has $44.51 B. IWM has an expense ratio of 0.19% and IJR charges 0.07%.

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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IQ Chaikin U.S. Small Cap ETF (CSML): ETF Research Reports
 
Vectrus, Inc. (VEC) : Free Stock Analysis Report
 
iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
Global Brass and Copper Holdings, Inc. (BRSS) : Free Stock Analysis Report
 
Patrick Industries, Inc. (PATK) : Free Stock Analysis Report
 
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