A smart beta exchange traded fund, the VanEck Morningstar SMID Moat ETF (SMOT) debuted on 10/04/2022, and offers broad exposure to the Style Box - All 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.
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.
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.
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 Van Eck. It has amassed assets over $431.93 million, making it one of the average sized ETFs in the Style Box - All Cap Blend. SMOT seeks to match the performance of the MORNINGSTAR US SML-MID CAP MOAT FOCUS ID before fees and expenses.
The Morningstar US Small-Mid Cap Moat Focus Index tracks the overall performance of small and mid-cap companies with sustainable competitive advantages and attractive valuations.
Cost & Other Expenses
For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.
Operating expenses on an annual basis are 0.49% for SMOT, making it on par with most peer products in the space.
SMOT's 12-month trailing dividend yield is 1.12%.
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 in the Consumer Discretionary sector - about 23.1% of the portfolio. Industrials and Information Technology round out the top three.
When you look at individual holdings, Carlyle Group Inc/the (CG) accounts for about 1.85% of the fund's total assets, followed by Chart Industries Inc (GTLS) and Carnival Corp (CCL).
The top 10 holdings account for about 16.76% of total assets under management.
Performance and Risk
The ETF has gained about 5.92% so far this year and is up about 8.71% in the last one year (as of 08/27/2025). In the past 52-week period, it has traded between $28.40 and $37.49
SMOT has a beta of 1.26 and standard deviation of 19.20% for the trailing three-year period. With about 105 holdings, it effectively diversifies company-specific risk .
Alternatives
VanEck Morningstar SMID Moat ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
iShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. iShares Core S&P Total U.S. Stock Market ETF has $74.92 billion in assets, Vanguard Total Stock Market ETF has $524.65 billion. ITOT has an expense ratio of 0.03% and VTI changes 0.03%.
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 - All 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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VanEck Morningstar SMID Moat ETF (SMOT): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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