Investors looking to the potential of small- and midcap (SMID) performance in a declining rate environment would do well to consider the Neuberger Berman Small-Mid Cap ETF (NBSM ). The actively managed fund offers diversified exposure when compared to the Russell 2500 Index benchmark.
Falling rates may prove a boon for SMID cap companies looking ahead. With their higher sensitivity to interest rates, these stocks offer rebound and outperformance potential compared to large-cap peers in a declining rate environment.
Invest in SMID Cap Stocks with NBSM
For advisors and investors considering expanding their exposure to the SMID cap space, NBSM is worth consideration. The fund offers an actively managed approach to SMID cap investing which could prove beneficial when navigating interest rate cuts. It’s currently up 5.39% on a price return basis as of Oct. 18, 2024.
The fund managers use bottom-up analysis when evaluating companies. NBSM focuses on quality companies that generate reliable free cash flow and elevated profitability. The companies also have conservative balance sheets and business models that set them apart from peers. The overall approach to SMID cap investing results in a diversified portfolio compared to benchmarks.
The top sectors by weight for NBSM included industrials at 31.45%, information technology at 21.7%, and financials at 10.45% as of Oct. 17, 2024. In comparison, the Russell 2500 Index, an index comprised of small- and mid-cap companies and the fund’s reference benchmark, offers different exposures. While industrials were the largest sector at 21.83% weight, the next highest sectors were financials at 15.48% and consumer discretionary at 14.84% as of Sept. 30, 2024, according to FTSE Russell.
The strategy also seeks to mitigate the elevated volatility inherent to small- and midcap investing while reducing downside risk. NBSM carries an expense ratio of 0.74%.
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