Making its debut on 02/23/2016, smart beta exchange traded fund Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD) provides investors broad exposure to the Style Box - Small Cap Growth category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $378.48 million, this makes it one of the average sized ETFs in the Style Box - Small Cap Growth. JSMD is managed by Janus Henderson. This particular fund, before fees and expenses, seeks to match the performance of the Janus Small/Mid Cap Growth Alpha Index.

The Janus Henderson Small/Mid Cap Growth Alpha Index selects small- and medium-sized capitalization stocks that are poised for smart growth by evaluating each company performance in three critical areas: growth, profitability, and capital efficiency.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Operating expenses on an annual basis are 0.30% for JSMD, making it on par with most peer products in the space.

It's 12-month trailing dividend yield comes in at 0.41%.

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.

For JSMD, it has heaviest allocation in the Healthcare sector --about 25.70% of the portfolio --while Industrials and Information Technology round out the top three.

When you look at individual holdings, Neurocrine Biosciences Inc. (NBIX) accounts for about 3.07% of the fund's total assets, followed by Incyte Corporation (INCY) and Heico Corporation (HEI).

Its top 10 holdings account for approximately 25.28% of JSMD's total assets under management.

Performance and Risk

The ETF has gained about 9.39% and is up about 21.55% so far this year and in the past one year (as of 09/19/2024), respectively. JSMD has traded between $54.25 and $71.94 during this last 52-week period.

JSMD has a beta of 1.12 and standard deviation of 23.51% for the trailing three-year period. With about 254 holdings, it effectively diversifies company-specific risk.

Alternatives

Janus Henderson Small/Mid Cap Growth Alpha ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 Growth ETF (IWO) tracks Russell 2000 Growth Index and the Vanguard Small-Cap Growth ETF (VBK) tracks CRSP U.S. Small Cap Growth Index. IShares Russell 2000 Growth ETF has $11.68 billion in assets, Vanguard Small-Cap Growth ETF has $17.75 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Growth.

Bottom Line

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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Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD): ETF Research Reports

Incyte Corporation (INCY) : Free Stock Analysis Report

Neurocrine Biosciences, Inc. (NBIX) : Free Stock Analysis Report

Heico Corporation (HEI) : Free Stock Analysis Report

iShares Russell 2000 Growth ETF (IWO): ETF Research Reports

Vanguard Small-Cap Growth ETF (VBK): ETF Research Reports

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