IShares Core S&P Small-Cap ETF and iShares S&P SmallCap 600 ETF’s low fee, broad diversification, and profitability bias make them hard to beat. Both the U.S. and Ireland-domiciled strategies earn Morningstar Medalist Ratings of Silver.
These funds track the S&P SmallCap 600 Index, which collects the smallest 600 stocks in the S&P 1500 composite index. Each constituent must meet initial market cap, liquidity, and profitability criteria to be eligible. The final portfolio is weighted by each stock’s float-adjusted market capitalization. 
Market-cap weighting is an efficient way to allocate the portfolio because it harnesses the market’s consensus opinion of each stock’s relative value. Faster-growing companies take up a larger share of the portfolio, while smaller companies that may be struggling take on a less-important role. This helps rein in turnover and associated trading costs.
The S&P SmallCap 600 Index operates on the smaller end of the small-cap market. Its average holding size was just over $2 billion as of April 2023, which is smaller than most index competitors. Small-cap stocks tend to be more volatile than their larger peers. However, the fund’s parent index only includes profitable names, which removes the lowest-quality small-cap stocks and contains volatility.
While the smaller names that constitute this portfolio can be volatile, the strategy’s broad reach ensures that one stock’s misfortune should not derail the entire portfolio. It stashes just 6% of assets in its top 10 holdings. That breadth helped the S&P SmallCap 600 Index return a sturdy 9.6% annually in the 10 years through April 2023. Each fund earned slightly less than that owing to its respective fee.

Analyst Rating

Controls risk in the U.S. small-cap market.

Associate Analyst

Zachary Evens

Rambus

Comfort Systems USA

e.l.f. Beauty

SPS Commerce

Applied Industrial Technologies

Ensign Group

Fabrinet

Allegheny Technologies

Meritage Homes

DXC Technology

A preference for profitable firms and sound diversification should minimize the risks of the strategy's smaller orientation. It earns an Above Average Process Pillar rating.

Above Average

Process

BlackRock’s industry-leading technology, global footprint, and extensive supporting cast earn an Above Average People Pillar rating. The team employs BlackRock’s Aladdin platform to fulfill much of its portfolio management tasks, and global trading desks allow traders to conduct foreign transactions in a cost-effective way.
The U.S.-domiciled fund is managed by the iShares U.S.-based team, which has endured some turnover in recent years. But index-tracking performance should remain tight, thanks to heavily automated processes and several long-tenured managers that remain at the helm. 
Amy Whitelaw left the team in February 2023 for another role within the organization. Paul Whitehead replaced Alan Mason as a manager in January 2022, when Mason left to focus on the firm’s customized institutional indexing capabilities. IShares has not named a successor for Whitelaw. Greg Savage, Jennifer Hsui, and Whitehead will continue to oversee the fund.
Meanwhile, the European-domiciled fund is managed by the EMEA team, which has maintained a notably low rate of turnover. IShares' London-based ETF portfolio management team is now headed by Sid Swaminathan, who took charge in February 2022. His service with the firm dates to 2005, including his years with BGI. These managers interact with a wider team of traders and managers around the globe to execute the fund’s day-to-day operations. The larger number of managers also limits the impact of personnel turnover when it does occur.

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares Core S&P Small Cap ETF

IJR tracks a market-cap-weighted index of primarily small-cap US stocks. The S&P Committee selects 600 stocks representing about 3% of the publicly available market.

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