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Mid-Cap ETFs Bring Diversified Exposure to a Key Market Segment

The iShares Russell Mid-Cap Value ETF (IWS) offers value to investors seeking attractive returns.

It’s easy for mid-cap companies (with values of approximately $2 billion to $10 billion) to get overshadowed in portfolio management by both the smaller and larger players around them that can hog the attention of the financial community. Sure, mid-cap stocks may offer less volatility than small caps – but the latter tend to be cheaper and potentially offer greater upside potential, as small companies have been more likely to enjoy drastic growth surges. And, sure, mid-caps may offer more growth potential than the more expensive large caps – but they have also carried more volatility than the established titans that can lend stability to both markets and portfolios.

Investing in funds may help mitigate risk in mid-caps

This mix of characteristics can make mid-caps a useful category for institutional investors with evolving risk appetites and outlooks. Some may foresee lesser returns and greater volatility ahead for small-caps in this new inflationary period, for example, or seek to lower their exposure to large-caps dominated by tech titans. Some investors will express these positions by choosing individual mid-cap companies that they believe are likely to outperform, but adding mid-cap exposure by selecting individual stocks brings inherent vulnerabilities, of course. If just a few equities markedly underperform, they could have an outsized negative effect on the portfolio.

Investing in mid-cap funds has long been a strategy to help mitigate these single stock risks. By holding many companies, mutual funds and ETFs can be somewhat insulated against volatility from the implosion of any single security while still benefiting from potential broad market gains. This can make funds a vital diversity tool for institution investors interested in adding mid-cap exposure. And historically, the blend of attributes in the mid-cap market have allowed these funds to seek attractive returns.

ETFs may offer an even more efficient mid-cap solution

In choosing a fund type, ETFs may offer advantages over traditional open-ended mutual funds. They tend to have greater transparency and lower operating costs, for two. But the flexibility ETFs carry is the real factor. Whereas moving in or out of major positions can take days with mutual funds, ETFs can accomplish this with a single trade – and that’s critical for institutional investors when they need to react quickly to market information.

The Russell Mid-Cap Value Index is one of the most popular reference indexes for both mid-cap ETFs and mutual funds. Created in February 1995, it’s comprised of about 700 stocks from the larger Russell Midcap Index (and, ultimately, the Russell 3000 Index, which is designed to measure the performance of almost all U.S. companies), skewing toward stocks with lower price-to-book ratios and lower forecasted growth values in the wider pool of mid-caps.

The iShares Russell Mid-Cap Value ETF (IWS) offers exposure to this important segment of the market by seeking to track the Russell Mid-Cap Value Index. In addition to its utility as a diversification tool, IWS can help tilt a portfolio toward value stocks – companies that appear to be trading at attractive prices (or undervalued by the market relative to comparable companies).

Launched in July 2001, IWS spreads its top five exposures sector exposures across Financials, Industrials, Real Estate, Consumer Discretionary and Information Technology (as of October 26, 2021; see table below).

As of October 27, 2021, IWS had net assets of $14,552,242,357 and a 30-day average daily trading volume of $358,619 with 702 holdings.

See the chart below for more details. You can find more info on IWS here.

IWS


Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Diversification and asset allocation may not protect against market risk or loss of principal. Buying and selling shares of ETFs may result in brokerage commissions.

Shares of ETFs may be bought and sold throughout the day on the exchange through any brokerage account.  Shares are not individually redeemable from an ETF, however, shares may be redeemed directly from an ETF by Authorized Participants, in very large creation/redemption units. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.

This material represents an assessment of the market environment as of the date indicated; is subject to change; and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any issuer or security in particular. The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. There is no guarantee that any strategies discussed will be effective.

Past performance does not guarantee future results. For iShares ETF performance, please visit www.iShares.com or www.blackrock.com. The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

The iShares Funds are not sponsored, endorsed, issued, sold or promoted by Russell, nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with Russell.

iSHARES and BLACKROCK are trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. All other marks are the property of their respective owners.

FOR INSTITUTIONAL USE ONLY – NOT FOR PUBLIC DISTRIBUTION

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