The small-midcap (SMIDcap) asset class could be a compelling opportunity in the near future.
SMIDcap ETFs are often underrepresented in portfolios. While U.S. large- and small-cap stocks are typical pillars in asset allocation models, the SMIDcap asset class is often overlooked.
The SMIDcap range has some variation by fund. However, it generally includes companies with market caps above $1 billion and below the largest in the Russell 2500 index.
SMIDcap stocks can potentially offer high growth potential, like small-caps. At the same time, SMIDcaps can potentially offer less volatility than small-caps, a quality found in large-caps. This area in between small- and large-cap companies unveils many untapped opportunities.
Over the past 10 years, U.S. SMIDcap stocks have generally underperformed U.S. large-cap stocks, partly due to the dominance of mega-cap tech. However, it’s important to note that SMIDcap companies have generally grown their earnings at a faster pace than their large-cap peers over the past 10 years, according to J.P. Morgan Wealth Management.
SMIDcap ETFs available to investors include the $364 million Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD ), the $361 million VanEck Morningstar SMID Moat ETF (SMOT ), the $193 million Neuberger Berman Small-Mid Cap ETF (NBSM ), the $191 million T. Rowe Price Small-Mid Cap ETF (TMSL ), and the $84 million Fidelity Fundamental Small-Mid Cap ETF (FFSM ).
Furthermore, Capital Group is poised to be the latest entrant to the small- and midcap space, with the upcoming launch of the Capital Group U.S. Small and Mid Cap ETF (CGMM).
The fund will invest in U.S. small- and midcap companies, defined by Capital Group as companies whose market capitalizations typically fall within the range of the Russell 2500 Index or the Russell Midcap Index, according to regulatory documents.
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