Designed to provide broad exposure to the Style Box - Small Cap Blend category of the market, the Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) is a smart beta exchange traded fund launched on 06/28/2017.

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 offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

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

GSSC is managed by Goldman Sachs Funds, and this fund has amassed over $542.87 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the Goldman Sachs ActiveBeta U.S. Small Cap Equity Index.

The Goldman Sachs ActiveBeta U.S. Small Cap Equity Index is designed to deliver exposure to equity securities of small capitalization U.S. issuers.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for this ETF are 0.20%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.16%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 20.70% of the portfolio, the fund has heaviest allocation to the Financials sector; Industrials and Healthcare round out the top three.

Taking into account individual holdings, Dec 24 Cme Eminirus2k (RTYZ24) accounts for about 0.64% of the fund's total assets, followed by Sprouts Farmers Market Inc (SFM) and Mueller Industries Inc (MLI).

The top 10 holdings account for about 4.44% of total assets under management.

Performance and Risk

Year-to-date, the Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF has gained about 17.40% so far, and is up roughly 22.14% over the last 12 months (as of 12/16/2024). GSSC has traded between $59.92 and $76.22 in this past 52-week period.

GSSC has a beta of 0.98 and standard deviation of 21.59% for the trailing three-year period. With about 1337 holdings, it effectively diversifies company-specific risk.

Alternatives

Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF is a reasonable option for investors seeking to outperform the Style Box - Small Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 2000 ETF (IWM) tracks Russell 2000 Index and the iShares Core S&P Small-Cap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $80.99 billion in assets, iShares Core S&P Small-Cap ETF has $92.68 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.

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 Blend.

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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Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC): ETF Research Reports

Mueller Industries, Inc. (MLI) : Free Stock Analysis Report

iShares Russell 2000 ETF (IWM): ETF Research Reports

Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report

iShares Core S&P Small-Cap ETF (IJR): ETF Research Reports

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