A sound investment process and strong management team underpin SPDR® Portfolio S&P 600 Sm Cap ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest 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

Ensign Group

Allegheny Technologies

SPS Commerce

Mueller Industries

Fabrinet

AAON

Alaska Air Group

Abercrombie & Fitch

SM Energy

Meritage Homes

The fund fully replicates the S&P SmallCap 600 Index, which captures the small-cap segment of the total investable U.S. equity market. An index committee determines the 600 constituents from a universe of US-domiciled stocks that pass its investability criteria. These criteria entail a market cap between $700 million and $3.2 billion and a liquidity threshold, as well as positive GAAP earnings for the most recent quarter and over the last four quarters. The profitability requirement helps shield it from less stable companies, especially among its smallest constituents. IPOs are only eligible for inclusion after 12 months of trading. This helps to ensure that these firms are financially viable and allows time for the market to incorporate a broader swath of participants' views into their share prices. 
Existing constituents are only removed should they continually and substantially violate the index’s inclusion criteria, as the index committee allows temporary deviations. This approach allows for more flexibility around reconstitution, thus reducing unnecessary turnover.
The portfolio minimizes stock-specific risk by holding every one of the 600 constituents in its benchmark index. No single stock collects more than 1% of the portfolio and its top 10 holdings make up just 6% of the portfolio. 
Stocks from the industrials, technology, consumer cyclical, and financial sectors claimed most of the portfolio. Together they amassed more than 60% of its assets as of April 2023. Utilities and communications stocks barely make a dent, together representing less than 5% of the portfolio. While indicative of the opportunity set, and nearly identical to the category average, these sector allocations represent a source of concentration risk that may not be rewarded.

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® Portfolio S&P 600 Sm Cap ETF's strong team drives the strategy's Above Average People Pillar rating. There are two managers listed on the fund: Karl Schneider, Teddy Wong. The team is well equipped, with an average of 19 years of portfolio management experience. Together, they manage a total of three strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position 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 Portfolio Small Cap ETF

SPSM tracks a market-cap-weighted index of US small-cap stocks selected by the S&P Committee.

SPDR Portfolio S&P 600 Small Cap ETF provides exposure to about 600 small-cap U.S. equities, with a portfolio managed on a market-cap-weighted basis. SPSM has a low expense ratio of 0.03% and has seen strong positive net inflows over the past year. The top sectors in SPSM's portfolio include Industrials, Financial Services, Consumer Cyclical, and Technology, reflecting its cyclical and riskier nature.

SPSM: Small-Cap U.S. Equities Are Modestly Undervalued

If you're interested in broad exposure to the Small Cap Blend segment of the US equity market, look no further than the SPDR Portfolio S&P 600 Small Cap ETF (SPSM), a passively managed exchange traded fund launched on 07/08/2013.

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The SPDR Portfolio S&P 600 Small Cap ETF invests based on the S&P SmallCap 600 Index. The iShares Russell 2000 ETF invests based on the Russell 2000 Index, the most popular one tracking Small-Cap stocks. Despite similar market-cap and growth/value allocations, the two ETFs differ significantly in sector allocations, with the SPSM ETF having a more defensive industry allocation.

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SPSM is an SPDR ETF that invests in the S&P 600 Small Cap Index with an expense ratio of 0.03%. Small caps may outperform large caps over the next decade due to attractive valuations, higher growth potential, and favorable economic trends. SPSM has advantages over other passive small-cap strategies and has historically outperformed the Russell 2000 by about 1.7% per year.

SPSM: A Good Way To Get Low-Cost Small Cap Exposure

I am increasing my equity exposure despite an imperfect setup due to the low valuation of the S&P 600 and S&P 400 indexes. Equal-weighted indexes historically outperform market cap weighted indexes, and I believe the current dominance of large-cap stocks is unusual. I recommend using S&P 600 and S&P 400 tracking ETFs for small and mid-cap exposure, respectively.

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News for SPDR Portfolio Small Cap ETF ETF (SPSM)