BlackRock launches US small-cap ‘focused value’ factor ETF

Oct 30th, 2020 | By | Category: Equities

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BlackRock has launched a new ETF providing focused exposure to value stocks within the small-cap segment of the US equity market.

BlackRock launches US small-cap focused value ETF

BlackRock offers an extensive suite of investment style ETFs targeting different size segments of the US equity market.

The iShares US Small Cap Value Factor ETF (SVAL US) has listed on Cboe BZX Exchange and comes with an expense ratio of 0.30%.

The fund is linked to the Russell 2000 Focused Value Select Index which is based upon the Russell 2000 Index universe of the largest 2,000 US-listed securities outside of the largest 1000.

The index methodology first removes companies ranked in the bottom 20% by liquidity as well as those ranked in the top 20% by risk (defined as one-year trailing volatility) and leverage.

Additionally, those firms with negative sentiment scores based on expected earnings per share are also excluded.

The remaining constituents are then assigned a composite score based on value factor metrics including cash flow, book value, and net income relative to market capitalization, with the methodology selecting and equally weighting the 250 stocks with the highest composite scores.

An index review takes place on a monthly basis but changes will only be made if the index’s weighted average composite value score falls below 90% of the score that could be achieved through a reconstitution and rebalance.

BlackRock already offers several ETFs tracking style indices focused on the US small-cap market; however, these funds tend to provide much broader exposure by including companies with blended style characteristics. They include the $8 billion iShares Russell 2000 Value ETF (IWN US) and the $4.9bn iShares S&P Small-Cap 600 Value ETF (IJS US).

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