The Hilton Small-MidCap Opportunity ETF (SMCO) seeks to provide capital appreciation by investing in small- and mid-capitalization U.S. companies that Hilton Capital Management identifies as having strong growth potential and attractive valuations. This actively managed equity ETF targets companies typically ranging from $300 million to $10 billion in market capitalization.
How It Works
SMCO employs an active management approach where Hilton Capital's portfolio managers conduct fundamental research to select small- and mid-cap stocks they believe are undervalued or positioned for above-average growth. The fund uses a concentrated portfolio strategy, typically holding 30-50 positions to maximize the impact of high-conviction picks. Portfolio construction emphasizes quality companies with strong management teams, competitive advantages, and sustainable business models, with rebalancing occurring as opportunities arise.
Key Features
- Active management by experienced Hilton Capital team with 25+ years managing small-mid cap strategies for institutional clients
- Concentrated approach with 30-50 high-conviction holdings allows for meaningful outperformance potential versus diversified index funds
- Recently launched in November 2023, offering investors access to Hilton's proven small-mid cap investment process in ETF format
Risks
- This ETF can lose significant value if the portfolio managers' stock selection proves incorrect, as concentrated holdings amplify both gains and losses compared to diversified funds
- Small- and mid-cap stocks are inherently more volatile than large-caps, potentially experiencing 40-60% declines during market downturns with slower recovery periods
- Active management risk means the fund may underperform passive small-mid cap index ETFs, especially after accounting for higher management fees and trading costs
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for growth-oriented investors with 3-7 year time horizons and high risk tolerance. Appropriate for investors seeking active management expertise in small-mid cap space and willing to accept higher volatility for potential outperformance. Works well alongside core large-cap holdings in diversified portfolios.