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Making its debut on 06/28/2017, smart beta exchange traded fund Goldman Sachs ActiveBeta U.S. Small Cap Equity ETF (GSSC) provides investors broad exposure to the Style Box - Small Cap Blend category of the market.
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.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Managed by Goldman Sachs Funds, GSSC has amassed assets over $485.19 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 Goldman Sachs ActiveBeta U.S. Small Cap Equity Index before fees and expenses.
The Goldman Sachs ActiveBeta U.S. Small Cap Equity Index is designed to deliver exposure to equity securities of small capitalization U.S. issuers.
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for GSSC are 0.20%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.62%.
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Financials sector - about 21.60% of the portfolio. Industrials and Healthcare round out the top three.
Taking into account individual holdings, Sprouts Farmers Market Inc (SFM) accounts for about 0.73% of the fund's total assets, followed by Corcept Therapeutics Inc (CORT) and Mueller Industries Inc (MLI).
GSSC's top 10 holdings account for about 4.32% of its total assets under management.
The ETF has lost about -14.34% so far this year and is down about -0.93% in the last one year (as of 04/21/2025). In the past 52-week period, it has traded between $55.86 and $76.22.
The ETF has a beta of 0.97 and standard deviation of 22.16% for the trailing three-year period. With about 1288 holdings, it effectively diversifies company-specific risk.
Goldman Sachs ActiveBeta U.S. Small Cap Equity 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 $58.51 billion in assets, iShares Core S&P Small-Cap ETF has $71.55 billion. IWM has an expense ratio of 0.19% and IJR charges 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.
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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This article originally published on Zacks Investment Research (zacks.com).
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