Hotchkis & Wiley SMID Cap Diversified Value Fund (HWSM) seeks to provide long-term capital appreciation by investing in small and mid-cap U.S. companies trading below their intrinsic value. This value-focused equity ETF targets undervalued stocks using fundamental analysis and contrarian investment principles.
How It Works
HWSM employs an actively managed approach using Hotchkis & Wiley's proprietary value screening process that identifies companies with low price-to-book ratios, discounted cash flows, and strong balance sheets relative to market price. The fund focuses on small and mid-cap stocks typically ranging from $300 million to $10 billion in market capitalization. Portfolio managers conduct bottom-up fundamental research to select 40-60 concentrated holdings, rebalancing based on valuation changes and market opportunities rather than fixed schedules.
Key Features
- Actively managed by experienced value investors with 40+ year track record at Hotchkis & Wiley investment management
- Concentrated portfolio of 40-60 best ideas allows for meaningful position sizes and potential alpha generation
- Recently launched fund with 0.00% expense ratio, though permanent fee structure likely higher upon full launch
Risks
- This ETF can lose value if value investing falls out of favor, as growth stocks may significantly outperform value stocks for extended periods
- Concentrated portfolio of 40-60 holdings creates higher volatility than diversified index funds, with individual stock failures impacting returns meaningfully
- Small and mid-cap stocks can decline 40-50% in bear markets and experience higher volatility than large-cap alternatives
Who Should Own This
Best suited for investors with 5+ year time horizons and medium-to-high risk tolerance seeking active value exposure as a satellite holding (10-20% of equity allocation). Appropriate for those believing in value investing's long-term outperformance and willing to accept periods of underperformance relative to growth-focused strategies.