The Inspire Small/Mid Cap ETF (ISMD) was launched on 02/28/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All 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.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
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.
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.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $209.25 million, this makes it one of the average sized ETFs in the Style Box - All Cap Blend. ISMD is managed by Inspire. Before fees and expenses, this particular fund seeks to match the performance of the Inspire Small/Mid Cap Impact Equal Weight Index.
The Inspire Small/Mid Cap Index selects securities from a universe of publicly traded, domestic small and mid-capitalization equity securities of companies which have an Inspire Impact Score of zero or higher.
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 0.57% for this ETF, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 1.22%.
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.
This ETF has heaviest allocation in the Financials sector - about 19.2% of the portfolio. Industrials and Information Technology round out the top three.
When you look at individual holdings, Compass Minerals (CMP) accounts for about 0.4% of the fund's total assets, followed by Ttm Technologies (TTMI) and Groupon Inc (GRPN).
Its top 10 holdings account for approximately 3.38% of ISMD's total assets under management.
Performance and Risk
Year-to-date, the Inspire Small/Mid Cap ETF has lost about -1.25% so far, and is up roughly 8.57% over the last 12 months (as of 07/03/2025). ISMD has traded between $29.72 and $40.75 in this past 52-week period.
ISMD has a beta of 1.06 and standard deviation of 21.19% for the trailing three-year period. With about 498 holdings, it effectively diversifies company-specific risk .
Alternatives
Inspire Small/Mid Cap ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard ESG U.S. Stock ETF (ESGV) tracks FTSE US ALL CAP CHOICE INDEX and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. Vanguard ESG U.S. Stock ETF has $10.67 billion in assets, iShares ESG Aware MSCI USA ETF has $13.82 billion. ESGV has an expense ratio of 0.09% and ESGU changes 0.15%.
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 - All 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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Inspire Small/Mid Cap ETF (ISMD): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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