Small Cap Value Quantitative US Stocks

Smart Beta Portfolios (Interactive Advisors Portfolios)

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0.20% annual

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Small-capitalization US stocks only

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$100

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The brochure just says "small-capitalization company versions of the above five portfolios" and gives no individual names.

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Not available

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The Small Cap Value portfolio gives investors systematic exposure to smaller U.S. companies that appear undervalued relative to their fundamentals. Using a quantitative screening process, the portfolio identifies stocks trading below what their financial metrics suggest they may be worth, focusing on businesses the broader market may be overlooking. With approximately 300 holdings, it provides broad diversification across the small-cap segment of the U.S. equity market. This disciplined, factor-driven approach aims to capture the potential benefits of value investing in smaller companies while keeping costs relatively low.

Interactive Advisors is an established name in the field of online investing, with a history of path-breaking work. The platform offers a variety of portfolios, including the Smart Beta portfolios, which are managed by Interactive Advisors's Chief Investment Officer and Investment Management team. The “Smart Beta” approach to portfolio construction is grounded in academic research. The goal of this strategy is to achieve an alternative risk-return profile which is more attractive than a simple capitalization-weighted index such as the S&P 500. Interactive Advisors Smart Beta portfolios follow rules-based investment strategies designed to provide systematic exposure to a fundamental factor or combination of factors.

Capital growth plus with a more complex portfolio or higher risk profile than broad equity markets. Investing in equities and concentrated portfolios and prepared to accept fluctuation in portfolio value.

Contrarian-minded investors: If you believe that overlooked companies can offer compelling opportunities, this portfolio aligns with your thinking. Its quantitative process systematically directs capital toward small-cap stocks with attractive valuations, seeking to capture potential recoveries before the broader market catches on. Diversification seekers: Investors looking to complement a core large-cap or growth-oriented portfolio may find small-cap value exposure a useful addition. This portfolio targets a distinct corner of the U.S. equity market that often behaves differently from widely held large-cap indexes, helping to broaden your overall market exposure. Risk-aware growth pursuers: Small-cap stocks can offer higher growth potential, but they also carry greater volatility. This portfolio is suited for investors who want access to that upside while appreciating built-in safeguards, such as volatility constraints and sector diversification limits, that aim to manage the bumpier ride smaller companies can bring.

Research: This portfolio's construction is grounded in academic research on factor-based investing. The goal is to achieve an alternative risk-return profile, which is more attractive than a simple capitalization-weighted index such as the Russell 2000. Interactive Advisors has conducted extensive research and back-testing to identify the specific valuation factors and rules that guide how stocks are selected and weighted. Approach: The portfolio uses a systematic algorithm to determine which stocks to include and how much to allocate to each position. Every quarter, the portfolio is rebalanced so that companies displaying strong value characteristics, meaning their stock prices look attractive relative to their earnings and other financial measures, have a greater likelihood of being included. Allocation discipline: The portfolio targets roughly 300 individual stock positions, providing broad exposure across the small-cap value landscape. Stocks with more attractive valuation ratios, including both trailing and forward price-to-earnings measures, receive larger allocations. This contrarian discipline directs capital toward companies that may currently be out of favor but could be positioned for recovery. As a risk control measure, the construction process reduces allocations to stocks with excessive volatility or poor liquidity. Sell discipline: Sell decisions follow the same disciplined framework that guides the rest of the portfolio. During each quarterly rebalance, stocks that no longer meet the value criteria are replaced by companies with more compelling characteristics. Exceptions: Positions in stocks undergoing corporate actions, such as mergers or acquisitions, may be sold or adjusted outside the normal rebalance schedule. Performance is calculated using then-applicable 0.08% management fee until March 1, 2024, and currently applicable 0.20% management fee as of March 1, 2024.

Built-in value discipline: This portfolio uses a systematic, rules-based process to identify small-cap stocks trading below their estimated fair value. By relying on quantitative frameworks rather than subjective judgment, it removes emotional bias from stock selection and consistently targets companies that may be underpriced by the broader market. Smarter risk controls: The portfolio is designed to limit exposure to highly volatile stocks and avoid heavy concentration in any single sector. With a target of approximately 300 positions, your investment is spread across a wide range of companies, helping to reduce the impact of any one holding on your overall returns. Research-backed factor exposure: The goal is to achieve an alternative risk-return profile, which is more attractive than a simple capitalization-weighted index such as the Russell 2000. By weighting stocks based on valuation ratios rather than company size alone, this approach gives you targeted exposure to the value factor that academic research has linked to long-term return potential.