ETF Watch: iShares Debuts Small/Midcap Fund

The new fund tracks the Russell 2500 covering the small- and midcap spaces.

Today BlackRock’s iShares unit is rolling out an ETF that targets the 2,500 stocks ranking below the largest 500 stocks in the U.S. market. The iShares Russell 2500 ETF (SMMD) fills in a void in the iShares lineup, covering both the small- and midcap space.

The fund comes with an expense ratio of 0.15% and lists on the Bats exchange, which is owned by ETF.com’s parent company, CBOE.

“The Russell 2500 has long been a staple for institutional investors, but lacked a turnkey ETF implementation,” said Martin Small, head of U.S. iShares at BlackRock.

The product can roughly serve as an S&P 500 completion fund even though the S&P 500 Index does not comprise the 500 largest stocks in the country based on market capitalization; rather, they’re chosen by committee.

Paired Exposure Common

For a long time, it was common for investors—in both the retail and institutional spaces—to pair an exposure to the S&P 500 Index with an exposure to the small-cap Russell 2000 Index. However, the problem with that suggests that roughly 500 stocks of significant size are overlooked.

Enter the Russell 2500 Index, which has become a popular index with the institutional space over the years, as institutional managers have gravitated away from the Russell 2000 as a benchmark for active portfolios.

That means there’s likely a ready audience in the institutional space where ETFs are a popular tool for equitizing cash, while retail investors may find SMMD useful for broadening the exposure of their portfolios beyond the large-cap segment.

Contact Heather Bell at [email protected].