Looking for broad exposure to the Small Cap Value segment of the US equity market? You should consider the JPMorgan BetaBuilders U.S. Small Cap Equity ETF BBSC, a passively managed exchange traded fund launched on 11/16/2020.

The fund is sponsored by J.P. Morgan. It has amassed assets over $520.35 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

Small cap companies have market capitalization below $2 billion. They usually have higher potential than large and mid cap companies with stocks but higher risk.

While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.48%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund’s holdings before investing. 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 19.90% of the portfolio. Healthcare and Industrials round out the top three.

Looking at individual holdings, Jpmorgan Us Govt Mmkt Fun accounts for about 1.50% of total assets, followed by Insmed Inc Common Stock INSM and Carpenter Technology CRS.

The top 10 holdings account for about 5.66% of total assets under management.

Performance and Risk

BBSC seeks to match the performance of the MORNINGSTAR US SML CP TRG MRK EXP EXT ID before fees and expenses. The Morningstar US Small Cap Target Market Exposure Extended Index is a free-float adjusted, market-cap weighted index that targets small cap securities traded in the U.S.

The ETF has gained about 7.42% so far this year and it’s up approximately 20.46% in the last one year (as of 09/16/2024). In the past 52-week period, it has traded between $48.58 and $67.50.

The ETF has a beta of 1.08 and standard deviation of 23.45% for the trailing three-year period. With about 796 holdings, it effectively diversifies company-specific risk.

Alternatives

JPMorgan BetaBuilders U.S. Small Cap Equity ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, BBSC is an excellent option for investors seeking exposure to the Style Box – Small Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Avantis U.S. Small Cap Value ETF AVUV and the Vanguard Small-Cap Value ETF VBR track a similar index. While Avantis U.S. Small Cap Value ETF has $12.95 billion in assets, Vanguard Small-Cap Value ETF has $29.58 billion. AVUV has an expense ratio of 0.25% and VBR charges 0.07%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

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