iShares U.S. Small-Cap Equity Factor ETF (0IJ4)

Overview

The described entity is a financial instrument, specifically a fund, that focuses on investing in small-capitalization equity securities. This strategic selection is sourced from the STOXX US Small Cap Index. The unique investment approach of this fund revolves around optimizing exposure to four key factors, namely momentum, quality, value, and low volatility. This optimization aims to leverage the potential growth inherent in small-cap enterprises while managing investment risk through a balanced focus on these factors. The fund commits at least 80% of its assets to securities that are either components of its chosen index or bear substantial economic similarities to these components. This stringent investment criterion ensures a focused portfolio strategy aligned closely with its underlying index.

Products and Services

• Small-Cap Equity Investments

At the heart of this fund's portfolio are small-capitalization equity securities selected from the STOXX US Small Cap Index. This selection criterion ensures that investments are made into companies with significant potential for growth, which are typically defined by their smaller market capitalization. By investing in these securities, the fund aims to capitalize on the agility and potential higher growth rates of small cap entities compared to their larger counterparts.

• Optimized Factor Exposure

The fund employs an optimization process designed to maximize exposure to momentum, quality, value, and low volatility. Momentum focuses on securities showing upward price trends, quality emphasizes companies with strong financial health, value seeks securities priced below their intrinsic value, and low volatility targets investments that promise steadier returns with less price fluctuation. This strategic combination allows the fund to maintain a balanced and diverse investment portfolio.

• Derivative Investments

In addition to direct equity investments, the fund is also permitted to allocate up to 20% of its assets in derivatives such as futures, options, and swap contracts. These financial instruments can be utilized for hedging against market risks or for speculative purposes, offering the potential for enhanced returns. This flexibility in investment strategy enables the fund to adapt to changing market conditions and capitalize on opportunities for additional gains.

• Cash and Cash Equivalents

As part of its investment strategy, the fund may hold positions in cash or cash equivalents. This practice is a risk management technique that ensures liquidity and safeguards against market volatility. By maintaining a portion of its portfolio in highly liquid assets, the fund can quickly respond to investment opportunities or meet sudden redemption requests without having to sell off assets at unfavorable prices.