Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the iShares Morningstar SmallCap Growth ETF is a passively managed exchange traded fund launched on 06/28/2004.

The fund is sponsored by Blackrock. It has amassed assets over $292.70 million, making it one of the average sized ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

With more potential comes more risk, and small cap companies, with market capitalization below $2 billion, epitomizes this way of thinking.

While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. Even though growth stocks are more likely to outperform their value counterparts in strong bull markets, value stocks have a record of delivering better returns in almost all markets than growth stocks.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.30%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 0.18%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 28.30% of the portfolio. Healthcare and Consumer Discretionary round out the top three.

Looking at individual holdings, Match Group Inc (MTCH Quick QuoteMTCH - Free Report) accounts for about 3.24% of total assets, followed by Datadog Inc Class A (DDOG Quick QuoteDDOG - Free Report) and Solaredge Technologies Inc (SEDG Quick QuoteSEDG - Free Report) .

The top 10 holdings account for about 14.92% of total assets under management.

Performance and Risk

JKK seeks to match the performance of the Morningstar Small Growth Index before fees and expenses. The Morningstar Small Growth Index measures the performance of stocks issued by small-capitalization companies.

The ETF has added roughly 19.56% so far this year and is up about 28.38% in the last one year (as of 10/22/2020). In the past 52-week period, it has traded between $142.18 and $260.81.

The ETF has a beta of 1.18 and standard deviation of 26.44% for the trailing three-year period, making it a medium risk choice in the space. With about 240 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Morningstar SmallCap Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, JKK is an outstanding option for investors seeking exposure to the Style Box - Small Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 2000 Growth ETF (IWO Quick QuoteIWO - Free Report) and the Vanguard SmallCap Growth ETF (VBK Quick QuoteVBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $9.38 billion in assets, Vanguard SmallCap Growth ETF has $11.68 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.