BlackRock launches iShares Russell 2500 ETF on Bats

Jul 10th, 2017 | By | Category: Equities

BlackRock has launched the iShares Russell 2500 ETF (SMMD) on Bats’ ETF MarketPlace, providing exposure to mid- and small-cap US equities.

BlackRock launches iShares Russell 2500 ETF

The iShares Russell 2500 ETF is the 43rd ETF from iShares to list on Bats.

The fund tracks the Russell 2500 Index, the lesser known cousin of the widely-followed Russell 1000, Russell 2000 and Russell 3000 indices. The Russell 2500 consists of the smallest 2,500 equity securities within the Russell 3000 index – a proxy for the performance of the total US stock market.

The fund is physically replicating and tracks the index by primarily holding the iShares Russell 2000 ETF (NYSE: IWM), which currently makes up 43.7% of SMMD’s portfolio, as well as individual holdings in the remaining 500 ‘mid-cap’ companies.

SMMD trades in US dollars and has a total expense ratio (TER) of 0.15% due to a contractual fee waiver in place until at least 31 July 2022. The fund’s gross expense ratio is 0.24%.

While the index has a history of being used by institutional investors to benchmark the performance of actively managed equity portfolios, SMMD represents the first time investors can gain passive exposure to the index through a low-cost ETF vehicle.

The fund will likely find favour with investors looking for access to mid- and small-cap US equities while avoiding the potentially overvalued tech-heavy large-cap segment of the market. It is also well suited to be used to equitize cash prior to being deployed into actively managed funds.

Investors looking to use the ETF as part of a completion portfolio should be aware that although the fund will pair reasonably well with another ETF tracking the bellwether S&P 500 Index, such as the $116bn iShares Core S&P 500 ETF (NYSE: IVV), due to the committee-directed constitution of the S&P 500 there is likely to be a partial overlap of constituents.

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