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Stock selection could be the key to gaining exposure to small cap Stocks. Rob Harvey, the mastermind behind the Dimensional U.S. Small Cap ETF, employs an actively managed approach to investing in the sector. By avoiding underperforming small caps that drag down the index, Harvey aims to enhance returns. The Russell 2000, which tracks small caps, has seen a more than 12% increase so far this year, while the broader S&P 500 has increased by about 23% in the same timeframe.

The top holdings of the fund currently include Sprouts Farmers Market, Abercrombie & Fitch, and Fabrinet, as per the Dimensional Fund Advisors website. Additionally, cash and cash equivalents make up 1.13% of the fund’s top holding.

Ben Slavin, the global head of ETFs at BNY Mellon, highlights a growing interest from investors in actively managed products to filter out small cap underperformers. Investor sentiment favoring small caps is evident in the flow of capital into these types of strategies, benefiting them.

As of the latest market close, the Dimension U.S. Small Cap ETF is trailing the Russell 2000 by over one percent this year.

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