Stock picking may be the key to getting exposure to small-cap stocks.
Rob Harvey, who is behind Dimensions American Small Cap ETFuses an actively managed approach to group purchasing. He tries to avoid underperforming small-cap stocks that drag the index down.
“There's no reason to hold companies that scrape the bottom of the barrel in terms of profitability,” the company's co-head of product specialists told CNBC's “ETF Edge” this week. “You can remove those things from your small-cap world, (and) you can do a lot to enhance returns.”
the Russell 2000which tracks small companies, is up more than 12% so far this year. At the same time, on a larger scale Standard & Poor's 500 Up about 23% in the same time frame.
As of Thursday, the fund's top holdings were Sprouts Farmers Market, Abercrombie & Fitch, FabriniteAccording to the Dimensions Fund Advisors website. However, his highest holding is cash and cash equivalents, which represents 1.13% of the fund.
Ben Slavin, global head of ETFs at BNY Mellon, notes that investors are looking for more actively managed products to screen out lagging small caps.
“Investor sentiment has shifted toward small caps, and you can see that in the numbers, in terms of where investors are putting their dollars, from a flow standpoint,” Slavin said. “These types of strategies are helpful.”
As of Friday's close, the Dimension US Small Cap ETF had underperformed the Russell 2000 by more than one percent this year.
