Designed to provide broad exposure to the Small Cap Blend segment of the US equity market, the ALPS O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM – Free Report) is a passively managed exchange traded fund launched on 12/30/2016.
The fund is sponsored by Alps. It has amassed assets over $860.48 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
There’s a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.
Blend ETFs usually hold a mix of growth and value stocks as well as stocks that exhibit both value and growth characteristics.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.48%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.07%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector–about 33.80% of the portfolio. Industrials and Consumer Discretionary round out the top three.
Looking at individual holdings, Houlihan Lokey Inc. (HLI – Free Report) accounts for about 2.26% of total assets, followed by Sei Investments Co. (SEIC – Free Report) and Lincoln Electric Holdings Inc. (LECO – Free Report) .
The top 10 holdings account for about 21.32% of total assets under management.
Performance and Risk
OUSM seeks to match the performance of the FTSE Russell US Qual / Vol / Yield Factor 3% Capped Index before fees and expenses. The OShares U.S. Small-Cap Quality Dividend Index is designed to reflect the performance of publicly-listed small-capitalization dividend-paying issuers in the United States exhibiting high quality, low volatility and high dividend yields.
The ETF has lost about -0.75% so far this year and is up about 14.39% in the last one year (as of 01/08/2025). In the past 52-week period, it has traded between $38.55 and $47.20.
The ETF has a beta of 1.06 and standard deviation of 16.85% for the trailing three-year period. With about 111 holdings, it effectively diversifies company-specific risk.
Alternatives
ALPS O’Shares U.S. Small-Cap Quality Dividend ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, OUSM is a good option for those seeking exposure to the Style Box – Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 ETF (IWM – Free Report) and the iShares Core S&P Small-Cap ETF (IJR – Free Report) track a similar index. While iShares Russell 2000 ETF has $72.37 billion in assets, iShares Core S&P Small-Cap ETF has $87.36 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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