Small-Cap Companies Can Offer Promise Of High Returns, But How Does One Find Winners Given The Risks Involved? A Look Inside Infracap's SCAP ETF
Benzinga
Published Apr 08, 2024 18:00
Updated Apr 08, 2024 19:10
Small-Cap Companies Can Offer Promise Of High Returns, But How Does One Find Winners Given The Risks Involved? A Look Inside Infracap's SCAP ETF
Benzinga - by Johnny Rice, Benzinga Staff Writer.
Small-cap companies are often overlooked by institutional and retail investors alike. They lack the sheen and popularity of the big names and often carry higher-than-average risk. Still, this volatility-related risk can be mitigated with a smart, active and well-diversified investing approach, and the returns can be lucrative.
That is exactly what the team at Infrastructure Capital Advisors aims to do with its InfraCap Small Cap Income ETF (NYSE:SCAP). The fund invests in a diverse set of small-cap companies seeking "above average yield" and "total return through a blended approach of capital appreciation and current income."
An Active Approach/h2 Success in small-cap investing requires constant research and tireless effort in order to stay ahead of the curve. Infracap drives investing decisions using a mix of quantitative and qualitative analysis. This analysis allows the team to potentially surpass passive benchmarked funds that cannot adjust to changes in the market.
Tax Benefits/h2 Traders who attempt to actively manage their own portfolio of small-cap investments can also run into myriad tax issues. Rather than selling securities, the structure of SCAP allows for an "in-kind" mechanism to meet redemptions. This means the ETF can avoid realizing capital gains, providing a favorable tax structure.
Performance/h2 Although past performance is no guarantee of future performance, it is worth taking a look at SCAP's track record compared to passive small-cap alternatives. SCAP has risen 4.68% in 2024 so far. In contrast, the Russell 2000 Index has gained 3.13%, and the iShares Morningstar Small-Cap ETF (NYSE:ISCB) is up only 2.09%.
Holdings SCAP has 69 holdings, making it more targeted than many of its passive competitors. The fund's top ten holdings make up 38.2% of the fund.
SCAP's current 5 largest holdings are as follows:
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