SPDR® S&P International Small Cap ETF (GWX)GWX

ETF SPDR® S&P International Small Cap ETF (IJR) - Overview

Profile:

• Focus: The ETF aims to track the performance of the S&P International SmallCap 600 Index, which comprises about 600 small-cap stocks from developed and emerging market economies outside the U.S. and Canada.
• Asset Allocation: It primarily invests in common stocks with a market capitalization ranging from $200M to $4.5Bn. Approximately 58% are from developed markets and 42% are from emerging economies.
• Investment Strategy: This passively managed index-tracking ETF seeks to replicate the overall performance of the S&P international small-cap market, offering broad diversification across sectors and regions.

Objective:

• The primary investment goal of IJR is to provide investors with a means to track the overall performance of the international small-cap segment, offering both capital appreciation and diversification potential.

Issuer:

• State Street Global Advisors (SSGA).
• Reputation: SSGA is one of the world's largest asset managers with over $3.8 Trillion in assets under management. It boasts a strong and established reputation within the industry.
• Management: The ETF is overseen by an experienced team of portfolio managers within SSGA with specific expertise in small and mid-cap investments.

Market Share: IJR captures approximately 22% of the international small-cap equity ETF market, making it the largest contender in its space.

Total Net Assets: $35.89 Billion (as of Jan 11, 2023).

Moat:

• First Mover Advantage: IJR was among the first ETFs to offer exposure to international small cap companies, gaining an established presence and investor trust.
• Low Fees & High Liquidity: It benefits from significant economies of scale due to its size, leading to a relatively low Expense Ratio while maintaining high liquidity for investor convenience.
• Efficient Tracking: IJR closely mirrors the performance of its underlying benchmark, offering a reliable and cost-effective way to gain international small-cap exposure.

Financial Performance:

• Over the past 5 years, IJR delivered an annualized total return of 6.42%.
• During the same period, it surpassed the performance of its benchmark, the S&P International Small Cap 600 Index, which returned 5.68%, showcasing its efficiency.

Growth Trajectory:

• International small caps are expected to exhibit higher growth potential compared to their large-cap counterparts due to their untapped potential and greater growth opportunities.
• This segment is projected to witness continued investor interest due to its diversification benefits and the prospect of outperforming larger companies within their respective industries.

Liquidity:

• Average Daily Trading Volume: 3,358,148 shares (as of Jan 3, 2023). This high figure ensures easy buying and selling opportunities for investors.
• Bid-Ask Spread: Tight bid-ask spreads averaging $0.04, indicating minimal transaction costs for investors.

Market Dynamics:

• Economic indicators: Global economic performance and interest rate decisions by central banks can influence the overall market sentiment, affecting small-cap stock valuations.
• Sector growth prospects: Growth potential of individual sectors like technology, healthcare, or consumer discretionary within the ETF's portfolio can drive its performance.
• Currency fluctuations: The ETF is exposed to currency risks as it holds international securities. Changes in exchange rates may affect its overall return.

Competitors:

• Vanguard FTSE All-World Ex US Small-Cap ETF (VXF) - Market Share: 7.45%
• iShares MSCI ACWI Ex US Small-Cap ETF (ACWX) - Market Share: 4.74%

Expense Ratio:

• 0.35% (as of Jan 26, 2023), making it relatively competitive within its category.

Investment Approach:

• Strategy: Passive - Replicates the S&P International Small Cap 600 Index
• Composition:
  • Stocks (100%) - Primarily in small-sized companies across various sectors and markets.
  • Top sector allocations: Financials (19.89%), Consumer Discretionary (19.43%), Technology (14.93%)(as of Feb 27, 2023)

Key Points:

• Provides broad and diversified access to international small caps
• Low expense ratio and high liquidity improve cost-efficiency
• Outperformed benchmark historically, showcasing efficient index tracking

Risks:

• Volatility: Small-caps tend to be more volatile than large companies, leading to possible larger swings in price.
• Market Risk: Sector performance, regional economic risks, and currency fluctuations can influence individual holdings within the portfolio.
• Emerging Market Exposure: Investments in developing countries might face political, economic, and social instability, potentially affecting returns.

Who Should Consider Investing:

• Investors seeking diversification into international small cap companies
• Individuals looking for long-term growth potential and capital appreciation
• Individuals willing to accept higher volatility in pursuit of potentially better returns
• Existing investors in large-cap or international stock portfolios who wish to diversify

*Fundamental Rating Based on AI: 8.5 / 10

Justification:

Based on a comprehensive analysis, IJR is awarded a high score. It benefits from strong fundamentals:

• Leading brand reputation with experienced management.
• High market share with significant assets under management reflecting investor trust.
• Competitive expense ratio.
• Consistent historical performance exceeding benchmark returns.
• Diversified portfolio offering exposure to international growth potential with high liquidity.

While market risk and volatility remain considerations, the positive factors outweigh these concerns for a well-diversified long-term portfolio.

Resource and Disclaimer:

Information gathered from:

1. State Street Global Advisors (SSGA) website - https://global.spdr.com/en_us/etf/detail/IJR
2. Yahoo Finance - https://finance.yahoo.com/quote/IJR

Disclaimer: This information is provided for informational purposes only and should not be taken as financial advice. It is essential to consult with a qualified financial professional before making any investment decisions.