The Invesco S&P SmallCap Quality ETF (XSHQ) was launched on April 6, 2017, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Blend segment of the US equity market.
The fund is sponsored by Invesco. It has amassed assets over $254.02 million, making it one of the average sized ETFs attempting to match the Small Cap Blend segment of the US equity market.
Why Small Cap Blend
Sitting at a market capitalization below $2 billion, small cap companies tend to be high-potential stocks compared to its large and mid cap counterparts, but come with higher risk.
Blend ETFs are aptly named, since they tend to hold a mix of growth and value stocks, as well as show characteristics of both kinds of equities.
Costs
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 this ETF are 0.29%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 1.38%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Financials sector -- about 24.5% of the portfolio. Industrials and Information Technology round out the top three.
Looking at individual holdings, Interdigital Inc (IDCC) accounts for about 2.9% of total assets, followed by Brinker International Inc (EAT) and Armstrong World Industries Inc (AWI).
The top 10 holdings account for about 21.89% of total assets under management.
Performance and Risk
XSHQ seeks to match the performance of the SmallCap 600 Quality Index before fees and expenses. The S&P SmallCap 600 Quality Index is composed of 120 securities in the S&P SmallCap 600 Index that have the highest quality score, which is calculated based on the average of three fundamental measures: return on equity, accruals ratio and financial leverage ratio.
The ETF has added roughly 7.23% so far this year and it's up approximately 6.72% in the last one year (as of 02/11/2026). In the past 52-week period, it has traded between $34.34 and $45.30.
The ETF has a beta of 0.96 and standard deviation of 20.2% for the trailing three-year period. With about 123 holdings, it effectively diversifies company-specific risk.
Alternatives
Invesco S&P SmallCap Quality ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XSHQ is a reasonable option for those seeking exposure to the Style Box - Small Cap Blend area of the market. Investors might also want to consider some other ETF options in the space.
The iShares Russell 2000 ETF (IWM) and the iShares Core S&P Small-Cap ETF (IJR) track a similar index. While iShares Russell 2000 ETF has $76.57 billion in assets, iShares Core S&P Small-Cap ETF has $97.27 billion. IWM has an expense ratio of 0.19% and IJR charges 0.06%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
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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Invesco S&P SmallCap Quality ETF (XSHQ): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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