A sound investment process and strong management team underpin iShares U.S. Small-Cap Eq Fac ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in yield exposure and volatility exposure compared with category peers. High yield exposure is attributed to holding more stocks with high dividend or buyback yields. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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 Pillar 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

Jabil

First Industrial Realty Trust

Jefferies Financial Group Inc

Builders FirstSource

Reliance Steel & Aluminum

EMCOR Group

IDACORP

Deckers Outdoor

Manhattan Associates

Lattice Semiconductor

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. iShares U.S. Small-Cap Eq Fac ETF earns a High Process Pillar rating. 

The predominant contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Respectable risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The parent firm's five-year risk-adjusted success ratio of 59% strengthens the process. The measure indicates the percentage of a firm's funds that survived and surpassed their respective category's median Morningstar Risk-Adjusted Return for the period. Their noteworthy success ratio suggests that this firm does well for investors and that this fund may benefit from that.

 This strategy targets deeper value plays than its peers’ average in the Small Blend Morningstar Category. But in terms of size exposure, it does not have much of a bias and resembles the typical portfolio. Examining additional factor exposure, the managers have consistently overweighted yield-paying companies compared with Morningstar Category peers in recent years, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. Different from its historical appetite, however, the Yield factor was in line with the Morningstar Category average in recent months. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. This contributes to a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. Given the high trading volume of holdings, this fund also holds highly liquid assets. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. Nevertheless, the fund's Liquidity exposure was in line with peers in the latest month. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio has allocations in its top two sectors, real estate and technology, that are similar to the category. The sectors with low exposure compared to category peers are healthcare and industrials; however, the allocations are similar to the category. The portfolio is composed of 856 holdings and is less top-heavy than peers. Specifically, 6.1% of the fund’s assets are concentrated within the top 10 fund holdings, compared to the category average's 25.7%.

High

Process

iShares U.S. Small-Cap Eq Fac ETF's strong team drives the strategy's Above Average People Pillar rating. There are three managers listed on the fund: Greg Savage, Jennifer Hsui, Paul Whitehead. The team is well equipped, with an average of 17 years of portfolio management experience. Together, they manage a total of 258 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. The team has lacked continuity recently, with a manager leaving in the last six months, detracting from its rating. Even though it is a passive fund, high turnover can still hinder the effectiveness of the investment process. 

 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.

Above Average

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 MSCI USA Small-Cap Multifactor ETF

SMLF tracks an index of small-cap US equities. Stocks are selected and weighted to increase exposure to 4 factors (quality, value, momentum and size) while maintaining similar characteristics to the MSCI USA Small Cap Index.

SMLF tracks an index of small-cap US equities. Stocks are selected and weighted to increase exposure to four factors (quality, value, momentum, and low volatility).

Launched on 04/28/2015, the iShares US SmallCap Equity Fac (SMLF) is a smart beta exchange traded fund offering broad exposure to the Style Box - Small Cap Blend category of the market.

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