Core Insights - The Russell 2000 Index has shown only modest gains since the Federal Reserve lowered interest rates, indicating that investors may need to be patient for significant returns from smaller stocks [1] - The Neuberger Berman Small-Mid Cap ETF (NBSM) offers a blend of small and mid-cap stocks, potentially appealing to investors due to midcaps' historically lower volatility and superior return profiles [2][5] - NBSM is actively managed, which can be advantageous in the SMID-cap market where many companies are underappreciated and mispriced, allowing active managers to add value [3][4] Investment Strategy - Active management in the SMID space focuses on identifying quality companies while avoiding fundamentally flawed firms, which is challenging with broad-based small-cap indexes [4] - Approximately 50% of companies in the Russell 2000 are unprofitable and highly leveraged, making them sensitive to interest rate changes; NBSM's focus on quality can mitigate this risk [5] - NBSM is underweight in the healthcare sector, which is often reliant on low borrowing costs, and overweight in industrial stocks, suggesting potential benefits from increased defense and infrastructure spending [6] Market Outlook - Rate cuts could positively impact smaller stocks, with analysts projecting the small-cap index could rise by as much as 20% in the next 12 months, compared to an 11% increase expected for the S&P 500 [7]