The market may be poised to see new categories step up to the plate and play a bigger role. Where 2024 saw a handful of firms provide outsized performance in a growth regime, 2025’s tariff-driven uncertainty could open up a new opportunity set. Smaller firms, for example, could be prepared to step up if overvalued large caps take a dip. A quality small cap ETF, specifically, could harness a widening market by leaning on some strong quality dividends.
See more: How Active ETF RFFC Can Find Opportunities in Uncertainty
The ALPS O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM ) charges a 48 basis point (bps) fee for its services. The quality small cap ETF tracks the O’Shares US Small-Cap Quality Dividend Index. In doing so, it seeks small cap U.S. stocks weighted by factors including quality, low volatility, dividend yield and dividend quality. Specifically, the strategy’s index looks at metrics like EBITDA, ROA, trailing five-year weekly volatility, and cash dividend growth and payouts.
Quality Small Caps ETF OUSM in 2025
Together, that helped the quality small cap ETF return 13.4% in 2024 per SS&C ALPS Advisors data. That outperformed the Morningstar U.S. Small-Cap Broad Value Extended Index in that time. The index returned 9.3% to OUSM’s 13.4% in the same period. Additionally, the fund is closing in on passing $1 billion in AUM for the first time, picking up $100 million to start 2025 per ETF Database data.
What about the fund, then, makes it worth considering right now? A focus on small caps could help bring forward some firms overlooked by the previous, large cap growth regime. By emphasizing quality via dividends, with caps on sectors, the strategy can identify those companies able to do well or even grow amid adversity. With uncertainty looming, a quality ETF like OUSM and its focus on smaller firms could be just what the doctor ordered for nervous investors.
VettaFi LLC (“VettaFi”) is the index provider for OUSM, for which it receives an index licensing fee. However, OUSM is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of OUSM.
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