BlackRock has launched a global equity small cap ETF in response to what it sees as growing investor demand to gain dedicated exposure to developed market small-cap companies.
BlackRock writes that the iShares MSCI World Small Cap UCITS ETF (WSML) is a way for investors to express a nuanced view within their equity allocation, allowing them to take a building block approach to broad exposure but with a lower level of idiosyncratic risk than single stock investments. It will also provide greater exposure to companies within real estate, industrials and materials.
The index provides access to over 4,000 small-sized companies from 23 developed market countries globally, accounting for approximately 14 per cent of the free float-adjusted market capitalisation across each country.
David Moroney, Head of iShares EMEA Product at BlackRock says: “Global equities account for approximately USD70 trillion in assets, with almost 12 per cent covered by the developed small cap segment. Investors are increasingly diversifying their global equity allocation to include small-cap stocks, and they are using ETFs as a tool to do this in a cost-efficient manner.
“The macro environment is also encouraging investors to revisit their allocation to global small-caps. Acceleration in economic growth will benefit small cap stocks, as these companies tend to add to employment quicker and contribute to growth faster. At the same time, through their domestic focus, smaller companies tend to benefit from domestic growth policies and will be less impacted by future changes in global trade arrangements.”
Deborah Yang, Head of EMEA Index Product at MSCI says, “Global equity indexes traditionally concentrated on large and mid-cap stocks. However, we are seeing increasing demand by clients who view global small caps as an integral part of the MSCI Investable Market Indexes.”
The iShares MSCI World Small Cap UCITS ETF is physically backed meaning it buys the constituents of the underlying index and has a total expense ratio of 0.35 per cent.