Making its debut on 12/30/2016, smart beta exchange traded fund ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM) provides investors broad exposure to the Style Box - Small Cap Blend category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
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.
There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.
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.
Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.
Fund Sponsor & Index
The fund is sponsored by Alps. It has amassed assets over $940.53 million, making it one of the average sized ETFs in the Style Box - Small Cap Blend. This particular fund seeks to match the performance of the FTSE Russell US Qual / Vol / Yield Factor 3% Capped Index before fees and expenses.
The OShares U.S. Small-Cap Quality Dividend Index is designed to reflect the performance of publicly-listed small-capitalization dividend-paying issuers in the United States exhibiting high quality, low volatility and high dividend yields.
Cost & Other Expenses
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 cousins, other things remaining the same.
Annual operating expenses for OUSM are 0.48%, which makes it on par with most peer products in the space.
OUSM's 12-month trailing dividend yield is 1.30%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
For OUSM, it has heaviest allocation in the Industrials sector --about 22% of the portfolio --while Financials and Consumer Discretionary round out the top three.
When you look at individual holdings, Td Synnex Corp. (SNX) accounts for about 2.12% of the fund's total assets, followed by Skyworks Solutions Inc. (SWKS) and National Healthcare Corp. (NHC).
OUSM's top 10 holdings account for about 20.69% of its total assets under management.
Performance and Risk
The ETF return is roughly 2.36% and it's up approximately 0.28% so far this year and in the past one year (as of 10/29/2025), respectively. OUSM has traded between $37.73 and $47.20 during this last 52-week period.
The ETF has a beta of 0.96 and standard deviation of 15.65% for the trailing three-year period. With about 113 holdings, it effectively diversifies company-specific risk .
Alternatives
ALPS O'Shares U.S. Small-Cap Quality Dividend 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 $70.2 billion in assets, iShares Core S&P Small-Cap ETF has $86.9 billion. IWM has an expense ratio of 0.19% and IJR changes 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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ALPS O'Shares U.S. Small-Cap Quality Dividend ETF (OUSM): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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