Is iShares U.S. Small-Cap Equity Factor ETF (SMLF) a Strong ETF Right Now?

Designed to provide broad exposure to the Style Box - Small Cap Blend category of the market, the iShares U.S. Small-Cap Equity Factor ETF (SMLF) is a smart beta exchange traded fund launched on 04/28/2015.

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.

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.

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.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

The fund is sponsored by Blackrock. It has amassed assets over $2.87 billion, making it one of the larger ETFs in the Style Box - Small Cap Blend. This particular fund, before fees and expenses, seeks to match the performance of the MSCI USA Small Cap Diversified Multiple-Factor Index.

The STOXX U.S. Small-Cap Equity Factor Index (USD) composed of U.S. small-capitalization stocks 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.

With one of the cheaper products in the space, this ETF has annual operating expenses of 0.15%.

It's 12-month trailing dividend yield comes in at 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 Industrials sector - about 19% of the portfolio. Financials and Information Technology round out the top three.

Taking into account individual holdings, Emcor Group Inc (EME) accounts for about 1% of the fund's total assets, followed by Comfort Systems Usa Inc (FIX) and Sandisk Corp (SNDK).

Performance and Risk

The ETF has added roughly 14.45% and it's up approximately 12.57% so far this year and in the past one year (as of 12/26/2025), respectively. SMLF has traded between $54.28 and $77.46 during this last 52-week period.

The fund has a beta of 1.10 and standard deviation of 19.75% for the trailing three-year period, which makes SMLF a high risk choice in this particular space. With about 866 holdings, it effectively diversifies company-specific risk .

Alternatives

iShares U.S. Small-Cap Equity Factor 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 $76.39 billion in assets, iShares Core S&P Small-Cap ETF has $90.22 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

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This article originally published on Zacks Investment Research (zacks.com).

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