Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the iShares Morningstar Small-Cap Growth ETF (ISCG) is a passively managed exchange traded fund launched on June 28, 2004.
The fund is sponsored by Blackrock. It has amassed assets over $709.91 million, making it one of the average sized 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.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.
Costs
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
Annual operating expenses for this ETF are 0.06%, making it the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.86%.
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.
This ETF has heaviest allocation to the Industrials sector -- about 27.1% of the portfolio. Information Technology and Healthcare round out the top three.
Looking at individual holdings, Woodward Inc (WWD) accounts for about 0.58% of total assets, followed by Coherent Corp (COHR) and Credo Technology Group Holding Ltd (CRDO).
The top 10 holdings account for about 5.23% of total assets under management.
Performance and Risk
ISCG seeks to match the performance of the MORNINGSTAR US SML CP BRD GRWTH EXTD ID before fees and expenses. The Morningstar US Small Cap Broad Growth Extended Index comprises of small-capitalization U.S. equities that exhibit growth characteristics.
The ETF has added about 5.07% so far this year and was up about 16.01% in the last one year (as of 08/13/2025). In the past 52-week period, it has traded between $39.44 and $54.11.
The ETF has a beta of 1.08 and standard deviation of 22.03% for the trailing three-year period. With about 949 holdings, it effectively diversifies company-specific risk.
Alternatives
iShares Morningstar Small-Cap 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, ISCG is a sufficient 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 Russell 2000 Growth ETF (IWO) and the Vanguard Small-Cap Growth ETF (VBK) track a similar index. While iShares Russell 2000 Growth ETF has $12.07 billion in assets, Vanguard Small-Cap Growth ETF has $19.54 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also 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 Morningstar Small-Cap Growth ETF (ISCG): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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