- Last month, the ALPS | O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM) outperformed its quality small-cap peers and broad-based small-caps, as its high-quality holdings withstood April’s tariff terror in the global markets. OUSM’s index methodology, which excludes cyclical sectors including Energy, Materials and Real Estate, while also screening for low volatility on high-quality small-cap stocks, was the right call in April to help protect investors from a larger drawdown common amongst other high-quality small-cap funds.
- Defensive sectors, including Consumer Staples and Health Care, provided the best returns in April, among OUSM’s high-quality portfolio, while a litany of OUSM’s holdings reported better-than-expected Q1’25 earnings. OUSM Consumer Staples name, Pricesmart Inc. (PSMT, 0.22% weight*), rallied 15.53% last month as the warehouse club retailer benefited from strong sales growth in all regions, with additional momentum coming from a weak U.S. dollar. OUSM Health Care name, Encompass Health Corp. (EHC, 2.66% weight*), returned over 15% in April, reaching a 26-year high after raising its 2025 guidance to reflect the success of its expansion strategy across rehabilitation facilities, which resulted in higher occupancy rates and profit growth.
- While defensive sectors were the winners in April, OUSM’s Info Tech and Financial sectors also gained on the back of strong fundamentals. Progress Software Corp. (PRGS, 0.72% weight*), an Artificial Intelligence (AI) software company, was OUSM’s best-performing name in April and returned 16.40% after reporting Q1’25 earnings above analyst expectations, thanks to strong enterprise demand. Another OUSM Info Tech name that posted strong earnings results, Badger Meter Inc. (BMI, 1.05% weight*), returned 16.07% last month as strong growth in its advanced smart metering solutions garnered higher margins. Lastly, pawn store operator, FirstCash Holdings (FCFS, 1.37% weight*), gained 11.34% last month in OUSM’s Financials sector allocation due to new store openings driving strong revenues in the first quarter.
“Even when compared with equal-weighted large-cap indexes, which reduce the outsized influence of mega-cap companies, the valuation discount of small-cap stocks remains substantially wider than normal.”
– Research Affiliates, April 8, 2025
Think Small, Not Big – The Case for Small-Caps to Shine
- While it has been a volatile start to 2025 with trade wars prompting a negative Q1'25 GDP print—the first time since 2022 that U.S. GDP was negative—U.S. small-caps may present an asymmetric investment opportunity relative to U.S. large-caps due to their heavier exposure to U.S. revenues, better earnings growth expected in 2025 and their outsized relative-valuation discount. Notably, broad small-caps are expected to grow earnings at a +38% clip in 2025, per Bloomberg, outpacing large-cap earnings growth of 8%, as the heavily weighted Financials sector in small-caps recovers on strong banking trends. With broad-based small-caps trading at a historically wide discount to large-caps (9x lower on a price-to-earnings (P/E) basis, as of 04/30/2025), there is potentially strong momentum behind a mean reversion trade in U.S. small-caps vs large-caps in 2025.
- Importantly, broad-based small-caps, as represented by the Russell 2000 Index, exhibit significantly higher volatility and more pronounced drawdowns with ~26% of companies by weight** in the Index not turning a profit; whereas, quality small-cap stocks with a focus on high profitability and dividend growth may provide investors with a smoother ride through the expected market volatility in 2025. The ALPS O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM) screens a starting universe of the smallest 2,500 U.S. companies by high return on assets (ROA), low volatility, low leverage and high dividend growth to help minimize any market drawdowns, while participating in the strong upside potential of U.S. small-caps.
- Since the start of 2025, as U.S. small-caps have been whipsawed by volatility, OUSM has outperformed the Russell 2000 Index by 356 basis points (bps) due to its quality-driven holdings, U.S. consumer-focused portfolio and low volatility characteristics.
- Additionally, OUSM’s flows of $341 million year-to-date have led the U.S. Small-Cap Quality ETF universe's total flows of $29 million over the last year (04/2024 - 04/2025) as investors rotate into high-quality small-cap ETFs, away from broad-based small-cap funds.
Performance Summary
| Cumulative | Annualized |
|||||||
| 1 M | YTD | 1 Y | 3 Y | 1 Y | 3 Y | 5 Y | SI | |
| OUSM - NAV (Net Asset Value) | -1.90% | -5.18% | 4.42% | 32.27% | 0.47% | 8.50% | 16.93% | 8.66% |
| OUSM - Market Price | -2.00% | -5.39% | 4.21% | 32.38% | 0.52% | 8.50% | 16.93% | 8.66% |
| O’Shares U.S. Small-Cap Quality Dividend Index - TR1 | -1.87% | -5.04% | 4.93% | 34.15% | 0.96% | 9.03% | 17.52% | 9.19% |
| Morningstar US Small-Cap Broad Value Extended Index - TR | -4.41% | -10.06% | 1.38% | 10.44% | -1.07% | 2.56% | 18.77% | 6.20% |
Source: Bloomberg L.P. and SS&C ALPS Advisors, cumulative performance as of 04/30/2025 and annualized performance as of 03/31/2025.
Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed, may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. For current month-end performance call 1-866-759-5679 or visit www.alpsfunds.com. Performance includes reinvested distributions and capital gains.
Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times.
Performance data prior to 06/21/2022 reflects the performance of the Fund as managed under the OSI ETF Trust.
Fund inception date: 12/30/2016, date reflects the commencement of investment operations.
1 The O’Shares U.S. Small-Cap Quality Dividend Index performance information reflects the blended performance of the FTSE USA Small Cap Qual/Vol/Yield 3% Capped Factor Index through 05/03/2018, the FTSE USA Small Cap ex Real Estate 2Qual/Vol/Yield 3% Capped Factor Index from 05/04/2018 through 05/31/2020 and the O’Shares U.S. Small-Cap Quality Dividend Index thereafter.
Total Operating Expenses: 0.48%
* Weight in OUSM as of 04/30/2025
** Source: Bloomberg, as of 04/30/2025
Top 10 Holdings
| Encompass Health Corp | 2.66% | Amdocs Ltd | 2.20% | |
| SEI Investments Co | 2.48% | Premier Inc | 2.17% | |
| Genpact Ltd | 2.47% | Chemed Corp | 2.16% | |
| Dolby Laboratories Inc | 2.32% | Lincoln Electric Holdings Inc | 2.11% | |
| Houlihan Lokey Inc | 2.26% | MSC Industrial Direct Co Inc | 2.05% |
As of 04/30/2025, subject to change
Important Disclosures & Definitions
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, call 1-866-759-5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
Shares of ETFs are bought and sold at market price (not NAV) and are not individually redeemable.
Performance data quoted represents past performance. Past performance is no guarantee of future results; current performance may be higher or lower than performance quoted.
All investments are subject to risks, including the loss of money and the possible loss of the entire principal amount invested. Additional information regarding the risks of this investment is available in the prospectus.
Concentration in a particular industry or sector will subject the Fund to loss due to adverse occurrences that may affect that industry or sector. The Fund may use derivatives which may involve risks different from, or greater than, those associated with more traditional investments. A Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.
The securities of small capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, small capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.
The Fund employs a “passive management” - or indexing - investment approach and seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell or buy a security unless that security is removed from or added to the underlying index, respectively.
Basis Point (bps): a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
FTSE USA Small Cap ex Real Estate 2Qual/Vol/Yield 3% Capped Factor Index: comprised of securities within the FTSE USA Small-Cap Index, excluding Real Estate. The index is designed to reflect the performance of three recognized equity risk factors: quality, low volatility and yield.
FTSE USA Small Cap Qual/Vol/Yield 3% Capped Factor Index: designed to reflect the performance of high quality US small-cap equities exhibiting low volatility and high dividend yields. Quality is measured by profitability and leverage. Constituents are selected and weighted based on quality, volatility and yield characteristics.
Morningstar US Small-Cap Broad Value Extended Index: designed to provide comprehensive, consistent representation of the small cap value segment of the US equity market.
O’Shares U.S. Small-Cap Quality Dividend Index: designed to reflect the performance of publicly-listed small-capitalization dividend paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds. The quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines.
Price/Earnings (P/E) Ratio: a valuation ratio of a company's current share price compared to its per-share earnings.
Russell 2000 Index: measures the performance of the small-cap segment of the US equity universe.
One may not invest directly in an index.
ALPS Advisors, Inc., registered investment adviser with the SEC, is the investment adviser to the Fund. ALPS Advisors, Inc. and ALPS Portfolio Solutions Distributor, Inc., affiliated entities, are unaffiliated with O’Shares Investments.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.
Not FDIC Insured • No Bank Guarantee • May Lose Value
OUS000406 04/30/2026
