A Closer Look At A Suddenly Popular Small Cap EAFE Fund

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May 12, 2017 12:57pm NASDAQ:SCZ

Today we speak about trading interest in the greater EAFE space, which also seems to be in tandem with interest in singular “Europe Equity” ETFs in terms of inflows across the board, involving ETFs such as VGK (Vanguard FTSE Europe, Expense Ratio 0.10%, $12.9 billion in AUM, over $230 million in lately) and EWG (iShares MSCI Germany, Expense Ratio 0.48%, $ 5 billion in AUM, over $270 million in).

Europe makes up about 62% of the MSCI EAFE index, and we have also seen creation activity in some of the benchmark “EAFE” names like EFA (iShares MSCI EAFE, Expense Ratio 0.33%, $71 billion in AUM, over $1 billion in) and IEFA (iShares Core MSCI EAFE, Expense Ratio 0.08%, $25 billion in AUM, more than $385 million in) as well this week.

Furthermore, even “EAFE Small-Caps” seem to be joining the fray as SCZ (iShares MSCI EAFE Small-Cap, Expense Ratio 0.40%, $8 billion in AUM, over $375 million in) has also attracted inflows during this time period, and is flirting with another 52-week high at current levels. SCZ is now the fifth largest fund in the greater “EAFE Equity” space in terms of assets, behind EFA, VEA (Vanguard FTSE Developed Markets, Expense Ratio 0.07%, $51 billion in AUM), IEFA, and DBEF (Deutsche MSCI EAFE Hedged Equity, Expense Ratio 0.35%, $8.6 billion in AUM) and it is the sixth largest “Small-Cap Equity” Fund in the U.S. ETF listed landscape thanks to 2017 asset growth of over $810 million in.

SCZ has a lesser weighting than its Large-Cap EAFE counterpart to Europe (55% versus 62%), with a 38% allocation to the Asia-Pacific. When we examine the underlying holdings of SCZ, we see a bevy of ordinary shares that trade overseas, with 1,605 individual securities owned in the portfolio currently as compared to EFA’s 937 securities and IEFA’s 2807 holdings. We also see a number of what are likely unknown companies given their international and small-cap nature on the top end of the portfolio, which likely explains why this fund may appeal to those whom are looking for an allocation to Small-Caps in the Developed Markets, but have little research available nor the acumen to select the right individual securities (not to mention potentially prohibitive trading costs or restraints given that these securities are ordinary shares).

Top holdings in SCZ are presently: 1) Teleperformance (0.34%), 2) Wirecard AG (0.34%), 3) Micro Focus International PLC (0.30%), 4) Informa PLC (0.30%), and 5) Disco Corp. (0.29%).


The iShares MSCI EAFE Small-Cap ETF (NASDAQ:SCZ) was trading at $57.21 per share on Friday afternoon, up $0.07 (+0.12%). Year-to-date, SCZ has gained 14.79%, versus a 6.90% rise in the benchmark S&P 500 index during the same period.

SCZ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 7 ETFs in the Foreign Small/Mid Cap Blend Equities ETFs category.

Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Paul Weisbruch

paul-weisbruchPaul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.

He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.

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