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

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Designed to provide broad exposure to the Small Cap Growth segment of the US equity market, the SPDR S&P 600 Small Cap Growth ETF (SLYG - Free Report) is a passively managed exchange traded fund launched on 09/25/2000.

The fund is sponsored by State Street Global Advisors. It has amassed assets over $3.52 billion, making it one of the larger ETFs attempting to match the Small Cap Growth segment of the US equity market.

Why Small Cap Growth

There's a lot of potential to investing in small cap companies, but with market capitalization below $2 billion, that high potential comes with even higher risk.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.15%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.01%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 18.40% of the portfolio. Information Technology and Consumer Discretionary round out the top three.

Looking at individual holdings, Abercrombie + Fitch Co Cl A (ANF - Free Report) accounts for about 1.59% of total assets, followed by Fabrinet (FN - Free Report) and Ati Inc (ATI - Free Report) .

The top 10 holdings account for about 11.77% of total assets under management.

Performance and Risk

SLYG seeks to match the performance of the S&P SmallCap 600 Growth Index before fees and expenses. The S&P SmallCap 600 Growth Index measures the performance of the small-capitalization growth sector in the U.S. equity market. The selection universe for the S&P SmallCap 600 Index includes all U.S. common equities listed on the NYSE, NASDAQ Global Select Market, NASDAQ Select Market and NASDAQ Capital Market with market capitalizations between $250 million and $1.2 billion.

The ETF return is roughly 11.70% so far this year and was up about 18.53% in the last one year (as of 07/24/2024). In the past 52-week period, it has traded between $68.97 and $93.91.

The ETF has a beta of 1.09 and standard deviation of 21.68% for the trailing three-year period, making it a medium risk choice in the space. With about 351 holdings, it effectively diversifies company-specific risk.

Alternatives

SPDR S&P 600 Small Cap Growth ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SLYG is a sufficient option for those seeking exposure to the Style Box - Small Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Growth ETF (IWO - Free Report) and the Vanguard Small-Cap Growth ETF (VBK - Free Report) track a similar index. While iShares Russell 2000 Growth ETF has $12.12 billion in assets, Vanguard Small-Cap Growth ETF has $17.77 billion. IWO has an expense ratio of 0.24% and VBK charges 0.07%.

Bottom-Line

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they 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.

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