Should JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC) Be on Your Investing Radar?

The JPMorgan BetaBuilders U.S. Small Cap Equity ETF (BBSC) was launched on 11/16/2020, and is a passively managed exchange traded fund designed to offer broad exposure to the Small Cap Value segment of the US equity market.

The fund is sponsored by J.P. Morgan. It has amassed assets over $466.30 million, making it one of the average sized ETFs attempting to match the Small Cap Value segment of the US equity market.

Why Small Cap Value

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

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. Looking at their long-term performance, value stocks have outperformed growth stocks in almost all markets. They are however likely to underperform growth stocks in strong bull markets.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.23%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Industrials sector--about 15.60% of the portfolio. Information Technology and Financials round out the top three.

Looking at individual holdings, Jpmorgan Us Govt Mmkt Fun accounts for about 1.33% of total assets, followed by Social Capital (SOFI) and Zoominfo Technologies (ZI).

The top 10 holdings account for about 5.84% of total assets under management.

Performance and Risk

BBSC seeks to match the performance of the MORNINGSTAR US SML CP TRG MRK EXP EXT ID before fees and expenses. The Morningstar US Small Cap Target Market Exposure Extended Index is a free-float adjusted, market-cap weighted index that targets small cap securities traded in the U.S.

The ETF has lost about -9.40% so far this year and is down about -4.54% in the last one year (as of 04/21/2022). In the past 52-week period, it has traded between $57.03 and $71.50.

The ETF has a beta of 0.80 and standard deviation of 21.99% for the trailing three-year period. With about 902 holdings, it effectively diversifies company-specific risk.

Alternatives

JPMorgan BetaBuilders U.S. Small Cap Equity 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, BBSC is a good option for those seeking exposure to the Style Box - Small Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 2000 Value ETF (IWN) and the Vanguard SmallCap Value ETF (VBR) track a similar index. While iShares Russell 2000 Value ETF has $14.21 billion in assets, Vanguard SmallCap Value ETF has $26.93 billion. IWN has an expense ratio of 0.24% and VBR 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.