Oh, how quickly we forget. In the go-go years of the late 90s, tech was king, and value was an afterthought. But when the bubble burst in the early 2000s, many investors found a savior in an unlikely place: U.S. Small Cap Value. This corner of the market, focused on smaller, publicly-traded companies trading at a discount to their intrinsic worth, provided a crucial haven and delivered strong performance while growth-oriented strategies faltered. Today, the core thesis remains the same: identify solid companies with lower price-to-earnings (P/E) or price-to-book (P/B) ratios that have been overlooked by the broader market. In a diversified portfolio, this category can still serve as a potential source of higher long-term growth and offer a valuable buffer during certain market cycles.
But not all Small Cap Value ETFs are created equal. The category has evolved significantly and now offers a wide spectrum of strategies beyond simple market-cap-weighted beta exposure. Investors can now choose from a variety of factor-tilted approaches, including funds that focus on dividends, momentum, or quality. Furthermore, the rise of multi-factor and actively managed ETFs provides even more granular options for those looking to fine-tune their exposure to this dynamic asset class.
Summary (as of 8/31/2025)
- Number of Funds: 32
- Total Assets Under Management (AUM): $94.7B
- Average Expense Ratio: 0.43%
- 1-Month Net Flows: $0.15B
- 1-Year Net Flows: ($0.28B)
The U.S. Small Cap Value category is a significant space, commanding nearly $95 billion in assets across more than 30 funds. Recent investor sentiment appears to be turning positive, with the category attracting a net inflow of $150 million over the past month. This is a notable shift from the modest net outflows experienced over the full year, suggesting that investors may be rotating back into this historically cyclical market segment.
Performance Snapshot (as of 8/31/2025)
The divergence in performance within the U.S. Small Cap Value category last month was significant, underscoring the importance of careful fund selection. While the category’s average 1-month return was a strong 9.98%, individual fund returns varied widely. The top-performing fund, the RZV Invesco S&P Smallcap 600 Pure Value ETF, soared with a 14.33% return. In contrast, the bottom-performing fund, the SCDV Bahl & Gaynor Small Cap Dividend ETF, posted a return of 4.59%. This created a total performance spread of 9.74% between the best and worst performers, highlighting that the specific strategy and holdings of an ETF can lead to vastly different outcomes for investors.
Drill Down: A Glimpse into the Full Report
The summary data only scratches the surface. Our in-depth report reveals critical insights that can help you make more informed decisions by highlighting the vast differences between funds in the same category. Here are a few key takeaways:
- Structure & Market Share: The category is dominated by behemoths, with the top 10 funds controlling 92% of the assets. The full report helps you compare their broad approaches to the more niche, concentrated strategies of the smaller players.
- Flows & Investor Sentiment: A look beneath the hood shows a tale of two categories. While a fund like AVUV pulled in over $315 million last month, CALF saw outflows of over $233 million, revealing a clear divergence in investor appetite for different small-cap value strategies.
- Risk-Adjusted Returns: While the VBR Vanguard Small Cap Value ETF leads the pack with a 3-year Sharpe Ratio of 0.55, our full report helps you question why. Is this a product of its underlying index, which may define ‘small-cap’ and ‘value’ differently, leading to a different company profile than more pure-play strategies?
- Portfolio Composition: The “average” fund’s 25.2% allocation to Financials can be misleading. The full data reveals that some funds have much heavier sector bets than others, which dramatically alters their risk and return profile.
- Fundamentals: Don’t assume all “value” funds are the same. Our report shows there is very little overlap between the top-rated funds for Value, Quality, and Growth, allowing you to find the specific factor exposure you’re truly seeking.
Your Competitive Edge
This is just a glimpse of the data available in our full report. By creating a free account, you can access the complete Equity: U.S. Small Cap – Value report and unlock all of these insights.
ETF category data is updated daily in the Home Office section of the ETF Action platform. Monthly summary PDFs (available to DIY subscribers and up) and in-depth excel data packs (available to Advisor Pro subscribers and up) are available on over 100 ETF categories.
Disclosures
This material is for informational purposes only and should not be considered investment advice. All investments, including ETFs, involve risk, including the possible loss of principal. Investors should consider their investment objectives, risks, charges, and expenses carefully before investing.
This analysis was developed by the team at ETF Action. We leverage advanced AI tools to assist in the drafting and refinement of our content, based on our expert prompts, direction, and final review.
