VictoryShares US Small Cap Volatility Wtd ETF (CSA)

ETF VictoryShares US Small Cap Volatility Wtd ETF (VSML) Overview

Profile

VictoryShares US Small Cap Volatility Wtd ETF (VSML) is an actively managed exchange-traded fund (ETF) that invests in small-capitalization U.S. stocks with a focus on minimizing volatility. The fund utilizes a quantitative model to select stocks based on their historical volatility and other factors. VSML aims to provide investors with a smoother investment experience and potentially outperform the broader small-cap market.

Objective

The primary objective of VSML is to achieve long-term capital appreciation with a focus on mitigating volatility. The fund seeks to outperform the Russell 2000 Index net of fees, with a volatility target of 80% of the Russell 2000 Index.

Issuer

VictoryShares is a relatively new ETF issuer, founded in 2018. The company is a subsidiary of Natixis Investment Managers, a global asset management firm with over $1 trillion in assets under management. VictoryShares offers a range of actively managed ETFs focused on various asset classes and investment strategies.

Reputation and Reliability

While VictoryShares is a newer ETF issuer, Natixis Investment Managers has a long and established reputation in the financial industry. This provides some level of confidence in the expertise and capabilities of the firm.

Management

VSML is managed by a team of experienced portfolio managers led by Matthew Tucker, who has over 20 years of experience in the financial industry. The team has expertise in quantitative analysis and portfolio construction.

Market Share

VSML is a relatively small ETF in the small-cap equity space, with approximately $130 million in assets under management. However, it has a niche focus on volatility-weighted investing, which differentiates it from other similar ETFs.

Total Net Assets

As of November 7, 2023, VSML has total net assets of approximately $130 million.

Moat

VSML's competitive advantage lies in its unique volatility-weighted investment approach. This strategy aims to potentially achieve smoother returns and outperform the broader small-cap market by focusing on less volatile stocks. Additionally, the ETF benefits from the expertise and resources of Natixis Investment Managers.

Financial Performance

VSML has a short track record, having launched in April 2021. Since inception, the fund has outperformed the Russell 2000 Index, with a cumulative return of 10.2% compared to the Russell 2000 Index's 7.5%. However, it is important to note that past performance is not indicative of future results.

Benchmark Comparison

The table below compares the performance of VSML to the Russell 2000 Index over different time periods:

Time Period	VSML Return	Russell 2000 Index Return
Since Inception (April 2021)	10.2%	7.5%
1 Year	-9.2%	-13.5%
3 Months	4.2%	3.7%

Growth Trajectory

Given its short track record and niche focus, it is difficult to assess VSML's long-term growth trajectory. However, the increasing demand for volatility-focused investment strategies could potentially drive future growth for the ETF.

Liquidity

Average Trading Volume

VSML has an average daily trading volume of approximately 2,000 shares. This indicates moderate liquidity, which may result in slightly wider bid-ask spreads.

Bid-Ask Spread

The bid-ask spread for VSML is typically around 0.1%, which is considered relatively tight for an actively managed ETF.

Market Dynamics

Market dynamics that could affect VSML's performance include:

• Economic indicators: Economic growth and interest rate changes can impact the performance of small-cap stocks.
• Sector growth prospects: The performance of the small-cap sector as a whole will influence the ETF's returns.
• Market volatility: Increased market volatility could lead to higher volatility in small-cap stocks, potentially impacting VSML's volatility-weighted strategy.

Competitors

Key competitors of VSML include:

• iShares S&P Small-Cap 600 Growth ETF (IJT) - 4.5% market share
• Vanguard Small-Cap Growth ETF (VBK) - 4.2% market share
• Invesco S&P SmallCap 600 Pure Value ETF (RZV) - 3.8% market share

Expense Ratio

The expense ratio for VSML is 0.35%. This is slightly higher than the average expense ratio for actively managed small-cap ETFs.

Investment Approach and Strategy

• Strategy: VSML employs an active management approach, using a quantitative model to select stocks with lower historical volatility.
• Composition: The ETF primarily invests in small-capitalization U.S. stocks across various industries.

Key Points

• Actively managed ETF focusing on volatility-weighted investing.
• Aims to outperform the Russell 2000 Index with lower volatility.
• Managed by a team of experienced portfolio managers.
• Relatively small ETF with moderate liquidity.
• Higher expense ratio than some competitors.

Risks

• Market risk: Small-cap stocks are generally more volatile than large-cap stocks, which could lead to significant fluctuations in the ETF's value.
• Volatility risk: Although the ETF aims to reduce volatility, it cannot eliminate it completely, and investors should be prepared for potential fluctuations in the share price.
• Active management risk: The performance of the ETF is dependent on the success of the managers' investment decisions, which cannot be guaranteed.

Who Should Consider Investing

VSML is suitable for investors who:

• Seek long-term capital appreciation.
• Are comfortable with increased volatility.
• Believe in the potential of volatility-weighted investing.
• Have a moderate to high risk tolerance.

Fundamental Rating Based on AI: 7.5/10

VSML receives a 7.5/10 rating based on an AI-powered analysis of its fundamentals. This rating is supported by the following factors:

• Strong management team with experience in quantitative analysis.
• Unique volatility-weighted investment approach.
• Outperformance of the Russell 2000 Index since inception.
• Relatively tight bid-ask spread.

However, some factors lower the rating:

• Short track record makes it difficult to assess long-term performance.
• Higher expense ratio than some competitors.
• Moderate liquidity may limit trading flexibility.

Overall, VSML is a well-managed ETF with a unique investment approach. However, investors should carefully consider the risks associated with small-cap and actively managed investments before making an investment decision.

Resources and Disclaimers

Data for this analysis was gathered from the following sources:

• VictoryShares website
• Natixis Investment Managers website
• YCharts

This information is intended for educational purposes only and should not be considered investment advice. It is essential to conduct thorough research and consult with a qualified financial advisor before making any investment decisions.