A smart beta exchange traded fund, the Schwab Fundamental U.S. Small Company ETF (FNDA) debuted on 08/13/2013, and offers broad exposure to the Style Box - Small Cap Value category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
FNDA is managed by Charles Schwab, and this fund has amassed over $9.37 billion, which makes it one of the largest ETFs in the Style Box - Small Cap Value. Before fees and expenses, FNDA seeks to match the performance of the Russell RAFI US Small Co. Index.
The RAFI Fundamental High Liquidity US Small Index measures the performance of small U.S. companies based on their fundamental size and weight.
Cost & Other Expenses
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Annual operating expenses for FNDA are 0.25%, which makes it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 1.09%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
Representing 19.6% of the portfolio, the fund has heaviest allocation to the Industrials sector; Financials and Information Technology round out the top three.
When you look at individual holdings, Compass Inc Class A (COMP) accounts for about 0.47% of the fund's total assets, followed by Mks (MKSI) and Victoria S Secret (VSXY).
The top 10 holdings account for about 3.75% of total assets under management.
Performance and Risk
Year-to-date, the Schwab Fundamental U.S. Small Company ETF has added roughly 21.35% so far, and is up about 30.9% over the last 12 months (as of 08/06/2026). FNDA has traded between $29.24 $38.31 in this past 52-week period.
The ETF has a beta of 1.03 and standard deviation of 19.11% for the trailing three-year period, making it a medium risk choice in the space. With about 923 holdings, it effectively diversifies company-specific risk .
Alternatives
Schwab Fundamental U.S. Small Company ETF is an excellent option for investors seeking to outperform the Style Box - Small Cap Value segment of the market. There are other ETFs in the space which investors could consider as well.
iShares Russell 2000 Value ETF (IWN) tracks Russell 2000 Value Index and the Vanguard Small-Cap Value Index Fund ETF Shares (VBR) tracks CRSP U.S. Small Cap Value Index. iShares Russell 2000 Value ETF has $14.56 billion in assets, Vanguard Small-Cap Value Index Fund ETF Shares has $37.99 billion. IWN has an expense ratio of 0.24% and VBR changes 0.05%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Small Cap Value
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Schwab Fundamental U.S. Small Company ETF (FNDA): ETF Research ReportsThis article originally published on Zacks Investment Research (zacks.com).
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