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Launched on 07/24/2000, the iShares Russell 2000 Growth ETF (IWO) is a passively managed exchange traded fund designed to provide a broad exposure to the Small Cap Growth segment of the US equity market.
The fund is sponsored by Blackrock. It has amassed assets over $8.92 billion, making it one of the largest ETFs attempting to match the Small Cap Growth segment of the US equity market.
Why Small Cap Growth
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Further, growth stocks have a higher level of volatility associated with them. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
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 counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.24%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.49%.
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.
This ETF has heaviest allocation to the Healthcare sector--about 25% of the portfolio. Information Technology and Industrials round out the top three.
Looking at individual holdings, Synaptics Inc (SYNA) accounts for about 0.67% of total assets, followed by Tetra Tech Inc (TTEK) and Lattice Semiconductor Corp (LSCC).
The top 10 holdings account for about 5.97% of total assets under management.
Performance and Risk
IWO seeks to match the performance of the Russell 2000 Growth Index before fees and expenses. The Russell 2000 Growth Index measures the performance of the small-capitalization growth sector of the U.S. equity market. It is a subset of the Russell 2000 Index, which measures the performance of the small-capitalization sector of the U.S. equity market & approximately 51% of the total market value of the Russell 2000 Index.
The ETF has lost about -30.32% so far this year and is down about -33.48% in the last one year (as of 07/01/2022). In the past 52-week period, it has traded between $194.20 and $327.35.
The ETF has a beta of 1.17 and standard deviation of 30.62% for the trailing three-year period, making it a high risk choice in the space. With about 1243 holdings, it effectively diversifies company-specific risk.
IShares Russell 2000 Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IWO is a reasonable option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The iShares S&P SmallCap 600 Growth ETF (IJT) and the Vanguard SmallCap Growth ETF (VBK) track a similar index. While iShares S&P SmallCap 600 Growth ETF has $4.72 billion in assets, Vanguard SmallCap Growth ETF has $11.64 billion. IJT has an expense ratio of 0.18% and VBK charges 0.07%.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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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iShares Russell 2000 Growth ETF (IWO): ETF Research Reports
Tetra Tech, Inc. (TTEK) : Free Stock Analysis Report
Lattice Semiconductor Corporation (LSCC) : Free Stock Analysis Report
Synaptics Incorporated (SYNA) : Free Stock Analysis Report
iShares S&P SmallCap 600 Growth ETF (IJT): ETF Research Reports
Vanguard SmallCap Growth ETF (VBK): ETF Research Reports
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