The iShares International Small-Cap Equity Factor ETF (ISCF) made its debut on 04/28/2015, and is a smart beta exchange traded fund that provides broad exposure to the Foreign Small/Mid Blend ETF category of the market.
What Are Smart Beta ETFs?
The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
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.
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.
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 Blackrock. It has amassed assets over $310.04 million, making it one of the average sized ETFs in the Foreign Small/Mid Blend ETF. Before fees and expenses, this particular fund seeks to match the performance of the MSCI World exUSA Small Cap Diversified Multiple-Factor Index.
The STOXX International Small-Cap Equity Factor Index composes of global developed market small-capitalization stocks, excluding the US, that have favourable exposure to target style factors subject to constraints.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Operating expenses on an annual basis are 0.23% for ISCF, making it one of the cheaper products in the space.
ISCF's 12-month trailing dividend yield is 4.11%.
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.
Taking into account individual holdings, Banco De Sabadell Sa (SAB) accounts for about 0.91% of the fund's total assets, followed by Swissquote Group Holding Sa (SQN) and Logitech International Sa (LOGN).
Its top 10 holdings account for approximately 5.55% of ISCF's total assets under management.
Performance and Risk
So far this year, ISCF return is roughly 4.38%, and was up about 9.46% in the last one year (as of 04/16/2025). During this past 52-week period, the fund has traded between $30.25 and $35.47.
The fund has a beta of 0.84 and standard deviation of 17.62% for the trailing three-year period, which makes ISCF a medium risk choice in this particular space. With about 1099 holdings, it effectively diversifies company-specific risk.
Alternatives
IShares International Small-Cap Equity Factor ETF is a reasonable option for investors seeking to outperform the Foreign Small/Mid Blend ETF segment of the market. However, there are other ETFs in the space which investors could consider.
Dimensional International Small Cap ETF (DFIS) tracks ---------------------------------------- and the Schwab International Small-Cap Equity ETF (SCHC) tracks FTSE DEVELOPED SMALL CAP EX US LIQUID INDEX. Dimensional International Small Cap ETF has $2.63 billion in assets, Schwab International Small-Cap Equity ETF has $3.95 billion. DFIS has an expense ratio of 0.39% and SCHC charges 0.11%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Foreign Small/Mid Blend ETF.
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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iShares International Small-Cap Equity Factor ETF (ISCF): ETF Research Reports Schwab International Small-Cap Equity ETF (SCHC): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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