The ETF flow leader board tends to show many large funds getting even larger. However, when I looked last week, one more moderately sized ETF caught my eye.
The VictoryShares US Small Mid Cap Value Momentum ETF (USVM ) gathered $615 million of net inflows year-to-date through February 20. Despite launching in October 2017, the fund had been off the radar for many investors for years. However, now the fund has over $900 million in assets. The fund’s tripling in size in such a short period of time is impressive.
What’s Inside the VictoryShares ETF
USVM might be the most descriptive ETF trading today. It focuses on small- and mid-cap U.S. stocks. That have attractive value characteristics and that also have favorable price momentum traits. Approximately 290 companies make it into USVM.
Relative to the Nasdaq US Small Mid Cap 1300 Index, USVM has significantly lower P/E and P/B ratios but only slightly lower historical earnings growth. Health care (16% of assets), industrials (16%), financials (14%), and consumer discretionary (14%) stocks are well represented in the diversified ETF. Merit Medical Systems, Old Republic International and Rithm Capital are some of the fund’s largest holdings.
The ETF gathered most of its net inflows this year over a three-day period in mid January. However, USVM has seen modest daily inflows in the subsequent month. The fund takes a different multi-factor approach than its cousin, the VictoryShares Small Cap Free Cash Flow ETF (SFLO ). SFLO combines quality and small size factors to build a forward-looking free cash flow ETF.
A Peer that Looks Very Different
USVM is not the only ETF seeking out smaller, undervalued companies with strong price momentum. The Invesco S&P SmallCap Value with Momentum ETF (XSVM ) is a peer. XSVM will turn 10 years old in a few weeks. The ETF had approximately $730 million in assets.
Despite a similar name to USVM, XSVM is built differently. XSVM has a whopping 46% of assets in financial stocks. The XSVM stake is triple that of its small-cap value momentum peer and double that of the S&P 600 Small Cap index. Consumer discretionary (17%) and industrials (14%) stocks were also widely held by the Invesco ETF.
Meanwhile, health care stocks represented only 2% of XSVM. This is also notably different from the VictoryShares fund. Asbury Automotive Group, Lincoln National, and StoneX Group are a few of the larger positions.
Holdings Matter More than Fees
In the past 12 months, USVM rose 18%, significantly outperforming XSVM’s 4.2% gain. The performance spread between the two funds showcases the distinctions between the two portfolios. Of course, past performance is not indicative of future results. While many people choose an ETF based on the expense ratio, we think this is less appropriate for multi-factor ETFs. The USVM fee is 0.30%, only seven basis points less than XSVM. Unlike USVM, XSVM has seen modest net outflows in 2025.
If making America even stronger stays in focus, then ETFs owning small cap companies stand to benefit. They have less multinational exposure.
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