Small cap opportunities may be hard to find amid a higher for longer interest rate regime. Often, smaller firms, particularly in tech, are valued based on future revenue and take on big debt to develop more revenue later. That adds to a complicated set of challenges in assessing small caps, which may also just be less transparent than mid cap or large cap firms. That’s where the quality small cap ETF OUSM can play a role.
See more: OUSM Shows Small-Cap Strategies Can Work
(OUSM ), the ALPS O’Shares US Small-Cap Quality Dividend ETF, recently surpassed $600 million in AUM. Per VettaFi ETF Database data, the strategy has seen its AUM rise by more than $200 million over the last six months. The quality small cap ETF has returned 22.7% over the last one year.
Behind Quality Small Cap ETF OUSM's Approach
Why, then, is it gathering so many assets and picking up such investor interest? The quality small cap ETF combines a few important trends. With economic uncertainty rising, more investors are turning to dividends and dividend-related strategies. That can offer some current income, which can particularly benefit those nearing retirement.
More than just current income, however, dividends can provide important information and data points. OUSM invests in the upside of the small cap world but applies its quality screens, including dividend factors. For example, it looks at dividend yield and quality when assessing small cap names. Adding those dividend factors to other attributes like low volatility and quality, it produces a list of durable names in the small cap world.
That has led to finance, producer manufacturing, and retail trade being its three lead sectors per VettaFi data. Charging 48 basis points (bps), its durable small cap names could make it a worthy addition on top of a core allocation for the second half of this year.
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