Is IQ Chaikin U.S. Small Cap ETF (CSML) a Strong ETF Right Now?

A smart beta exchange traded fund, the IQ Chaikin U.S. Small Cap ETF (CSML) debuted on 05/16/2017, and offers broad exposure to the Style Box - Small Cap Blend category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

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

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.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

CSML is managed by New York Life Investments, and this fund has amassed over $222.21 million, which makes it one of the average sized ETFs in the Style Box - Small Cap Blend. CSML seeks to match the performance of the NASDAQ Chaikin Power US Small Cap Index before fees and expenses.

The NASDAQ Chaikin Power US Small Cap Index is a rules-based, quantitative index designed to enhance the NASDAQ US 1500 Index, by selecting stocks with the highest Chaikin Power Gauge rating.

Cost & Other Expenses

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.35%, making it on par with most peer products in the space.

The fund has a 12-month trailing dividend yield of 1.42%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Financials sector - about 21.50% of the portfolio. Industrials and Consumer Discretionary round out the top three.

Looking at individual holdings, Us Silica Holdings Inc (SLCA) accounts for about 0.79% of total assets, followed by Sleep Number Corp (SNBR) and Calix Inc (CALX).

Its top 10 holdings account for approximately 6.31% of CSML's total assets under management.

Performance and Risk

The ETF has added roughly 25.79% and is up about 56.13% so far this year and in the past one year (as of 10/28/2021), respectively. CSML has traded between $22.61 and $36.95 during this last 52-week period.

The fund has a beta of 1.34 and standard deviation of 30.96% for the trailing three-year period. With about 482 holdings, it effectively diversifies company-specific risk.

Alternatives

IQ Chaikin U.S. Small Cap 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 SmallCap ETF (IJR) tracks S&P SmallCap 600 Index. IShares Russell 2000 ETF has $68.96 billion in assets, iShares Core S&P SmallCap ETF has $70.23 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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IQ Chaikin U.S. Small Cap ETF (CSML): ETF Research Reports
 
Calix, Inc (CALX) : Free Stock Analysis Report
 
U.S. Silica Holdings, Inc. (SLCA) : Free Stock Analysis Report
 
iShares Russell 2000 ETF (IWM): ETF Research Reports
 
iShares Core S&P SmallCap ETF (IJR): ETF Research Reports
 
Sleep Number Corporation (SNBR) : Free Stock Analysis Report
 
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