A sound investment process and strong management team underpin SPDR® S&P 600 Small Cap Growth ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy merits an Above Average Process Pillar rating. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People, Process and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Allegheny Technologies

SPS Commerce

Ensign Group

Mueller Industries

Fabrinet

Meritage Homes

Abercrombie & Fitch

AAON

Installed Building Products

The S&P SmallCap 600 Growth Index assigns a growth and value score to each stock in the S&P SmallCap 600 Index. It allocates the fastest-growing third to the growth index, while it sweeps the cheapest third into the S&P SmallCap 600 Value Index. The approach splits the middle third between the two indexes based on their style traits until the market cap for each amounts to approximately half of the S&P SmallCap 600 Index.

This approach admits some cheaper names into the growth index, improving its breadth across the value-growth spectrum. Almost 30% of its portfolio overlaps with the S&P SmallCap 600 Value Index.

S&P requires all new entrants to be profitable to join the index. This should reduce the number of struggling companies included in the portfolio and should give the fund a modest quality tilt. Tiny and unprofitable firms usually perform best during market rallies, but they also tend to fall especially quickly when markets sour. This extra step is unique among index fund peers and should effectively control risk in an otherwise risky category.

The portfolio features smaller companies than most of its peers in the small-growth category. This fund's average market cap was just $2.9 billion as of January 2024, or around half that of the typical peer. The average constituent size is smaller because this index is filled only after its larger siblings, the S&P MidCap 400 Index and S&P 500, claim the largest 900 profitable companies in the US. As of July 2023, only stocks with market caps between $850 million and $5.2 billion qualified for the S&P SmallCap 600 Index.

The fund's broad reach minimizes stock-specific risk. The portfolio usually holds around 350 stocks with less than 12% of fund assets allocated to its largest 10. Market-cap weighting contributes to this excellent diversification, minimizing the risk of a single stock having an outsize impact on fund performance. No one position claims more than 1% of the portfolio.

The portfolio's sector composition looks a little different than its average peer because of its smaller size and the cheaper stocks that it holds. Tighter market-cap constraints than most peers mean that the fund does not hold some stocks common to competitor portfolios, further shaping portfolio differences relative to the category average. The fund has underweighted technology and healthcare stocks in recent years while overweighting cyclical and real estate companies relative to the category norm. These differences will drive differences in short-term returns. But the fund’s small size, low fee, and sound diversification should carve out a durable advantage over the long term.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

Above Average

Process

SPDR® S&P 600 Small Cap Growth ETF benefits considerably from its equity team, earning it an Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, David Chin. Experience on the team is abundant, with over 25 years of average portfolio management experience. Together, they manage a total of five strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

State Street Global Advisors is under new leadership but continues to move along the positive trajectory established by former leaders. SSGA maintains its Above Average Parent Pillar rating.
Cyrus Taraporevala, who oversaw much of SSGA’s recent transformation, retired from the CEO position in December 2022 and passed the baton to his successor, Yie-Hsin Hung. She inherited a business that’s become more disciplined with its fund lineup. Fees have come down, while product development remains focused on fixed-income and sustainability funds, and many of SSGA’s launches have echoed that intention.
The seeds that SSGA planted over the past several years have been bearing fruit. It built out a low-cost series of portfolio building-block ETFs in the U.S. bearing the “SPDR Portfolio” branding. SSGA launched these later than its industry rivals, so they aren’t as large. But they’re competitive, with solid management and low fees, which helped them consistently take in new money over the past several years.
SSGA continued to overhaul its ETF business in Europe with most of its recent fixed-income and sustainability fund launches. Many of these funds track indexes and charge relatively low fees. With operations in the U.S. and Europe standing on a firm foundation, SSGA will put more focus on its Asia-Pacific business—the smallest regional segment of its business.

Parent

SPDR S&P 600 Small Cap Growth ETF

SLYG tracks a market-cap-weighted index of US small-cap securities exhibiting growth characteristics.

SPDR S&P 600 Small Cap Growth ETF holds over 300 stocks of the S&P 600 Index with relative high growth and valuation. The portfolio is well-diversified across sectors and holdings, with industrials being the heaviest sector. SLYG has not only high growth rates, but also superior quality metrics compared to the benchmark.

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Should SPDR S&P 600 Small Cap Growth ETF (SLYG) Be on Your Investing Radar?

Small caps had a lackluster 2023 but saw improved performance in the last two months of the year. Small business optimism and positive economic trends support a bullish thesis for small caps and the SLYG ETF. The SPDR S&P 600 Small Cap Growth ETF is currently undervalued and poised for a strong year in 2024.

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Growth securities outperformed value securities during the first half of the year, much of which was harnessed in large-cap stocks. Small-cap growth assets have performed worse than large-cap growth, but still show potential for growth and inflation-hedging in the long term. I rate SLYG a Buy, as its lesser focus on big tech could grant it an extra layer of protection against market declines, despite hindering momentum at the same time.

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SLYG invests in small-cap U.S. growth stocks. On a sub-consensus earnings growth projection, the fund is very much likely to be undervalued.

SLYG: Small-Cap Growth Stocks Are Clearly Undervalued

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Equal-weight ETFs limit the risk of a severe downfall in any particular security, providing a nice balance in the portfolio.

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The SPDR S&P 600 Small Cap Growth ETF (SLYG) hits a new 52-week high. Are more gains in store?

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American Airlines

Alphabet

Microsoft

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News for SPDR S&P 600 Small Cap Growth ETF ETF (SLYG)