Goldman Sachs unveils active US small-cap ETF

Oct 9th, 2023 | By | Category: Equities

Goldman Sachs Asset Management has introduced a new actively managed ETF delivering access to a ‘core’ strategy focused on US small-cap stocks.

Goldman Sachs launches active US small-cap ETF

Small-caps have the high-growth potential of emerging mid- and large-cap industry leaders.

The Goldman Sachs Small Cap Core Equity ETF (GSC US) has been listed on NYSE Arca with an expense ratio of 0.75%.

Small-cap stocks, often overlooked in favour of their larger counterparts, offer a distinct benefit in diversifying investment portfolios.

Although inherently more volatile than large- and mid-cap stocks, small-caps exhibit the high-growth potential of emerging mid- and large-cap industry leaders. Capturing successful US companies in their early stages can potentially yield strong, long-term returns.

GSC focuses on US companies that generally have market capitalizations under $15 billion, although up to 25% of the fund’s assets may be allocated to non-US securities including those listed in emerging markets.

Managed by a team of experienced portfolio managers, and harnessing the capabilities of Goldman Sachs’ Fundamental Equity Research division, the ETF utilizes a quality focus and robust valuation discipline to select around 100 of Goldman’s highest-conviction ideas.

The investment strategy focuses on companies positioned for long-term growth, carefully evaluated based on their business franchises, long-term prospects, and management quality. The ETF may also consider environmental, social, and governance (ESG) factors in its decision-making process.

As of 5 October, the ETF contained 97 holdings. Emphasizing a commitment to diversification, the largest position, Federal Signal, represented just 2.4% of the portfolio, while the sector allocation was also suitably balanced primarily across industrials (20.3%), information technology (18.1%), financials (15.1%), consumer discretionary (13.2%), and health care (11.8%).

GSC’s fee of 0.75% is notably higher than that charged by the largest passive US small-cap ETFs such as the $65 billion iShares Core S&P Small-Cap ETF (IJR US), which comes with an expense ratio of just 0.06%, or the $50bn iShares Russell 2000 ETF (IWM US), which costs 0.19%.

Investors are, of course, paying for Goldman Sach’s proprietary research and investment expertise. By targeting robust, high-growth stocks, and avoiding loss-making and volatile companies, GSC aims to deliver superior risk-adjusted performance compared to similar broad-market strategies.

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