Small cap investing may have had a tough time of things this year, but that hasn’t stopped the quality small cap ETF (OUSM ), the ALPS O’Shares US Small-Cap Quality Dividend ETF. The strategy has not only surpassed $300 million in AUM this year, but it’s also closed out 2023 crossing $400 million. That recent marker comes as markets have started to see the appeal of small caps given how cheap they are. That new milestone may then invite investors to revisit the strategy once again ahead of the new year.
First off, small caps are historically cheap, which stands out in a U.S. equities market that is still very expensive. At the same time, small caps continue to provide potent upside for the investor that can identify the right companies. OUSM’s quality small cap ETF approach, which tries to weed out some of the small cap strugglers, could provide one way to do so.
Indeed, the strategy tracks a U.S. small cap index weighted towards quality, low volatility, high dividend yield, and dividend quality. The ETF takes the S-Network U.S. Equity Mid/Small-Cap 2500 Index, and takes those factors to produce an overall ranking score. The strategy applies a 2% cap to any single constituent and sets a 22% cap on each sector.
That strategy may be contributing to OUSM reaching nearly $410 million in AUM. The strategy has done well YTD, returning 13.5% in that time. That’s helped it outperform its ETF Database Category and Factset Segment averages. It has also done so over the last five, three, and one year periods.
Looking ahead to 2024, then, what might add to the quality small cap ETF’s forward momentum? A rate cut would help, of course, but it’s possible that even the anticipation of cuts would help. In whichever case, investors may want to consider the quality small cap ETF as it continues to add to its AUM.
For more news, information, and analysis, visit the ETF Building Blocks Channel.