Should You Consider Adding iShares Morningstar Small-Cap Value ETF (ISCV) to Your Investment Watchlist?

Overview of iShares Morningstar Small-Cap Value ETF (ISCV)

For investors seeking broad access to the U.S. small-cap value equity market, the iShares Morningstar Small-Cap Value ETF (ISCV) is a noteworthy option. This passively managed fund, which began trading on June 28, 2004, aims to track the performance of small-cap value stocks in the United States.

Managed by ISCV currently manages over $626 million in assets, positioning it as a mid-sized ETF within its category.

Understanding Small Cap Value Investing

Small-cap companies, typically valued at under $2 billion, often present greater growth potential compared to larger firms, though they also carry increased risk. Value stocks, characterized by lower price-to-earnings and price-to-book ratios, generally experience slower sales and earnings growth. Historically, value stocks have outperformed growth stocks across most market cycles, though they may lag during robust bull markets.

Fee Structure

When evaluating ETFs, the expense ratio is a key consideration. Lower fees can enhance returns if all other factors are equal. ISCV stands out with an annual expense ratio of just 0.06%, making it one of the most cost-effective choices in its segment.

The fund also offers a 12-month trailing dividend yield of 1.9%.

Portfolio Composition and Major Holdings

Before investing, it's crucial to review an ETF's holdings, as diversification helps reduce the risk associated with individual stocks. Most ETFs, including ISCV, provide daily transparency regarding their portfolios.

ISCV allocates approximately 23.2% of its assets to the Financials sector, with Industrials and Consumer Discretionary sectors also making up significant portions of the fund. Key holdings include Viatris Inc (VTRS) at 0.57% of assets, followed by Alcoa Corp (AA) and Annaly Capital Management Reit Inc (NLY). The top ten holdings collectively represent about 4.84% of the fund’s assets.

Performance and Risk Profile

The fund seeks to replicate the performance of the Morningstar US Small Cap Broad Value Extended Index, which consists of U.S. small-cap stocks with value characteristics. Year-to-date, ISCV has returned roughly 7%, and over the past year (as of 02/26/2026), it has gained about 18.08%. During the last 52 weeks, its share price has ranged between $51.37 and $74.38.

With a beta of 1.05 and a three-year standard deviation of 19.96%, ISCV offers broad diversification across approximately 1,088 holdings, helping to mitigate company-specific risks.

Other ETF Alternatives

ISCV holds a Zacks ETF Rank of 2 (Buy), reflecting its favorable expense ratio, expected returns, and momentum. Investors interested in the small-cap value space may also consider other ETFs such as the iShares Russell 2000 Value ETF (IWN) and the Vanguard Small-Cap Value ETF (VBR). IWN manages $13.09 billion in assets with a 0.24% expense ratio, while VBR oversees $34.43 billion and charges just 0.05% in fees.

Conclusion

Passively managed ETFs like ISCV are increasingly popular among both individual and institutional investors due to their low costs, transparency, flexibility, and tax advantages. They are particularly well-suited for long-term investment strategies.