Second Active Small Cap Value ETF of 2023 Debuts

Second Active Small Cap Value ETF of 2023 Debuts

Today saw the launch of yet another small cap value ETF. The EA Bridgeway Omni Small_Cap Value ETF (BSVO) rolled out in the wake of the JPMorgan Active Small Cap Value ETF (JPSV) last Wednesday.

BSVO has an expense ratio of 0.47% and lists on the Nasdaq stock market.

The new fund is actively managed and focuses on small cap securities that exhibit value characteristics, including that they are priced cheaply. Eligible securities are selected using a “statistical, evidence-based approach,” and various risk management criteria are implemented.

For example, the fund’s managers may limit the weight of a holding to reduce risk or take into account ESG-related risks. However, in general, securities within the portfolio are weighted by market capitalization, the prospectus says.

Somewhat unusually, the prospectus filing discusses the use of the term “Omni” in the fund’s name, noting that it refers to the fact that the fund will invest in a “broad and diverse group” of securities that represent more than 600 issuers. Indeed, at launch, the fund held a portfolio of roughly 580 securities.

The fund’s largest holdings include PBF Energy (1.2%), Permian Resources Corp. (1%) and Frontline PLC (1%).

BSVO follows on the heels of the launch of JPSV, with both funds covering the small cap value space. Up until the start of this week, the Vanguard Total Stock Market ETF (VTI) was trailing small cap value ETFs such as the iShares S&P Small-Cap 600 Value ETF (IJS) and the Invesco S&P SmallCap 600 Pure Value ETF (RZV)so far this year. That trend seems to have come to an abrupt halt on Monday, following the collapse of two U.S. banks, which spurred a downturn in small cap stocks in addition to banking stocks.

With two funds covering the small cap value category making their debut this year within just a few days of each other, it’s hard not to compare them. However, they could not be more different despite technically covering the same asset class.

JPSV is significantly more expensive, with an expense ratio 0.74%. Plus, its nontransparent status means that investors don’t know what they hold on a daily basis. Its latest proxy portfolio includes just about 100 holdings, meaning it is a far narrower fund than BSVO.

However, both funds could see a rebound should the current banking disasters prove to be short-lived in their effects on the market.


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