IJR: U.S. Small-Cap Barometer Has Risks And Disadvantages (NYSEARCA:IJR)

Core Insights - The iShares Core S&P Small-Cap ETF (IJR) has delivered a total return of 907% since inception, significantly outperforming the iShares Core S&P 500 ETF (IVV) [3] - IJR is primarily a mid-cap ETF, with a weighted average market cap of $3.98 billion, and 76.9% of its net assets allocated to companies with market caps above $2 billion [11][41] - The ETF has a low expense ratio of 0.06%, making it one of the cheapest options in its subclass [12] ETF Overview - IJR is passively managed and tracks the S&P SmallCap 600 Index, utilizing a representative sampling indexing strategy [4][5] - As of September 8, 2025, IJR had assets under management of $86.18 billion [12] - The ETF includes 601 equities, accounting for 98.64% of net assets, with a modest allocation to cash and other asset classes [26] Performance Metrics - Over the period from June 2000 to August 2025, IJR outperformed IVV by an annualized return of 1.27%, with a CAGR of 9.39% compared to IVV's 8.12% [18][19] - The best year for IJR was 2000, with a return of 10.04%, while its worst year was 2008, with a decline of 31.52% [20] - In the last ten years (September 2015 to August 2025), IJR's annualized return was 9.41%, significantly lower than IVV's 14.57% [22] Sector Exposure - IJR has a higher allocation to traditional sectors such as financials (18.82%) and industrials (18.68%) compared to IVV, which has a significant focus on technology (33.30%) [30] - The ETF's exposure to IT is modest at 12.66%, indicating a lower growth potential compared to large-cap portfolios [31] Quality and Value Characteristics - IJR has a weighted average adjusted earnings yield of 4.44%, higher than IVV's 3.59%, appealing to value investors [25][32] - However, only 51% of IJR's net assets are allocated to companies with a B- Quant Profitability rating or higher, indicating potential quality issues [31] Comparison with Peers - IJR is one of the largest ETFs tracking the S&P 600, with a low turnover rate of 25% and a strong 10-year annualized total return [40] - Compared to its peers, IJR has a larger AUM and lower expense ratio, but it has underperformed IVV in the last five and ten years [39][40] Conclusion - IJR offers exposure to small- and mid-cap U.S. equities, with a strong historical performance since inception, but has faced challenges in recent years, particularly in growth and quality metrics [41][42] - It may be suitable for investors looking for diversification away from large-cap investments, but they should be aware of the associated risks and quality concerns [41][42]