State Street SPDR US Small Cap Low Volatility Index ETF

SMLV

Market cap $258M

SPDR SSGA US Small Cap Low Volatility Index ETF focuses on U.S. small-cap stocks with low volatility but doesn't outperform broader or larger-cap low volatility funds. SMLV's portfolio is heavily weighted towards value stocks, with 54% in value and only 6% in growth, leading to weaker growth prospects. The fund has a high 68.7% exposure to the financial sector, making it vulnerable during economic downturns and less diversified.

The SPDR SSGA US Small Cap Low Volatility Index ETF achieves low volatility through a concentrated portfolio in financial services, outperforming the Russell 2000 with lower volatility. SMLV's low price-to-earnings multiples make it suitable for value-oriented investors, especially those bullish on financials, particularly regional banks. Despite sector concentration, SMLV's outlook is positive, as it is poised to benefit from local U.S. infrastructure investments and increased M&A activity.

SMLV tracks a small-cap low-volatility index in order to provide exposure to the small-cap segment but with a low-volatility bias. This may appear like a good idea for risk-averse investors, but the limited impact the low-volatility factor has here complicates things. For a defensive position, choosing a mid-cap or large-cap fund with a low-volatility bias seems like the wiser choice.

Friday's disappointing jobs report has put a huge damper on economic sentiment for the moment. Goldman Sachs has bumped up the odds of a recession from 10% to 25% over the next 12 months.

SPDR® SSGA US Small Cap Low Volatility Index ETF offers exposure to low-volatility US small-cap stocks, focusing on the lower half of the spectrum based on volatility. Fund holdings include Nelnet Inc, Community Financial System, PJT Partners Inc, Hanover Insurance Group, and Old National Bancorp. Sector allocation is surprising, with Financials making up nearly 70% of the fund, followed by Industrials, Real Estate, and Health Care. Peer comparison shows outperformance against iShares MSCI USA Small-Cap Minimum Volatility Factor ETF.