This investment vehicle seeks to track a portfolio of small- and mid-cap U.S. equities exhibiting characteristics commonly associated with higher expected returns. Such characteristics, often referred to as “value” factors, may include lower price-to-book ratios, lower price-to-earnings ratios, and higher dividend yields compared to the broader market. It utilizes a systematic, rules-based approach to portfolio construction and management.
Targeting these specific segments of the market offers potential benefits for investors. Academic research suggests that value stocks have historically outperformed growth stocks over the long term. Furthermore, focusing on smaller companies provides access to a segment of the market that may offer greater growth potential. By combining these two approaches, investors aim to capture both value and size premiums. This strategy has been employed by sophisticated institutional investors for decades.
