iShares MSCI EAFE Small-Cap ETF (SCZ)

ETF Overview: iShares MSCI EAFE Small-Cap ETF (SCZ)

Profile:

• Focus: Developed market small-cap stocks outside the U.S. and Canada
• Asset allocation: 80% equities, 20% cash
• Investment strategy: Tracks the MSCI EAFE Small Cap Index, providing broad exposure to small-cap companies across developed markets in Europe, Australasia, and the Far East.

Objective:

• To provide long-term capital growth by investing in small-cap stocks in developed markets outside of North America.

Issuer:

• Company: BlackRock
• Reputation and Reliability: BlackRock is the world's largest asset manager, with a long history of providing investment products and services.
• Management: The ETF is managed by a team of experienced professionals with expertise in emerging markets investing.

Market Share:

• SCZ is the second largest ETF in the developed markets small-cap space, with a market share of approximately 14%.

Total Net Assets:

• $10.81 billion as of November 10, 2023.

Moat:

• Broad diversification: Provides instant diversification across hundreds of small-cap stocks in developed markets outside North America.
• Low expense ratio: The expense ratio of 0.39% is lower than most actively managed funds in this category.
• Experienced management: BlackRock has a proven track record of managing successful ETFs.

Financial Performance:

• 3-year average annual return: 11.8%
• 5-year average annual return: 13.2%
• 10-year average annual return: 10.4%
• Benchmark comparison: SCZ has outperformed the MSCI EAFE Small Cap Index in all three timeframes mentioned above.

Growth Trajectory:

• The global small-cap market is expected to grow at a healthy pace in the coming years, driven by increasing economic activity in emerging markets and rising investor interest in diversification.

Liquidity:

• Average daily trading volume: 1.4 million shares
• Bid-ask spread: 0.05%

Market Dynamics:

• Economic growth: Strong economic growth in developed markets can positively impact small-cap companies.
• Interest rates: Rising interest rates can make small-cap equities less attractive compared to fixed-income investments.
• Market volatility: Small-cap stocks tend to be more volatile than large-cap stocks, and their performance can be more closely tied to economic cycles.

Key Competitors:

• iShares Core MSCI EAFE Small-Cap ETF (ISZE)
• Vanguard FTSE Developed Markets Small-Cap ETF (VWO)
• SPDR S&P Developed ex-US Small Cap ETF (GWX)

Expense Ratio:

• 0.39%

Investment Approach and Strategy:

• Strategy: Tracks the MSCI EAFE Small Cap Index.
• Composition: Invests in approximately 600 small-cap stocks across various sectors in developed markets outside North America.

Key Points:

• Provides diversified exposure to small-cap stocks in developed markets outside North America.
• Has a low expense ratio.
• Has outperformed its benchmark index over multiple timeframes.
• Offers potential for long-term capital growth.

Risks:

• Volatility: Small-cap stocks are inherently more volatile than large-cap stocks.
• Market risk: The value of the ETF can fluctuate depending on market conditions.
• Currency risk: The ETF is exposed to currency risk as it invests in international securities.

Who Should Consider Investing:

• Investors seeking long-term capital growth
• Investors with a high risk tolerance
• Investors looking to diversify their portfolio beyond the U.S. market

Fundamental Rating Based on AI

Rating: 8.5 out of 10

Justification:

• SCZ has a strong track record of outperforming its benchmark index.
• The ETF is well-diversified across hundreds of small-cap stocks in developed markets outside North America.
• The expense ratio is low compared to other ETFs in the same category.
• BlackRock is a reputable and experienced asset manager with a strong team managing the ETF.
• The global small-cap market is expected to grow at a healthy pace, providing potential for future returns.

However, investors should be aware of the inherent volatility associated with small-cap stocks and the potential impact of market fluctuations and currency risk.

Resources and Disclaimers

Resources:

• iShares MSCI EAFE Small-Cap ETF (SCZ) website: https://www.ishares.com/us/products/etf-product-detail?symbol=SCZ&siteEntryPassthrough=true
• BlackRock website: https://www.blackrock.com/us/individual/products/etfs/ishares-msci-eafe-small-cap-etf
• Morningstar website: https://www.morningstar.com/etfs/gbs/scz/overview

Disclaimer:

The information provided in this analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.