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Is Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) a Strong ETF Right Now?

The Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) made its debut on 06/28/2017, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Small Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

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This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.

Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.

Fund Sponsor & Index

The fund is sponsored by Goldman Sachs Funds. It has amassed assets over $424.31 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. GSSC, 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Operating expenses on an annual basis are 0.20% for GSSC, making it on par with most peer products in the space.

GSSC's 12-month trailing dividend yield is 1.36%.

Sector Exposure and Top Holdings

ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Industrials sector - about 19.20% of the portfolio. Financials and Healthcare round out the top three.

Taking into account individual holdings, Jun 23 Cme Eminirus2k (RTYM3) accounts for about 1.16% of the fund's total assets, followed by Atkore Inc (ATKR) and Emcor Group Inc (EME).

The top 10 holdings account for about 4.28% of total assets under management.

Performance and Risk

The ETF has lost about -1.33% so far this year and is down about -1.09% in the last one year (as of 05/16/2023). In the past 52-week period, it has traded between $50.18 and $61.36.

GSSC has a beta of 0.98 and standard deviation of 23.61% for the trailing three-year period. With about 1249 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 $47.77 billion in assets, iShares Core S&P Small-Cap ETF has $63.47 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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

EMCOR Group, Inc. (EME) : Free Stock Analysis Report

iShares Russell 2000 ETF (IWM): ETF Research Reports

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

Atkore Inc. (ATKR) : Free Stock Analysis Report

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Zacks Investment Research