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iShares Core S&P Small-Cap ETF

IJR:NYSE

equity ETF | passive | iShares | Tracks S&P Dow Jones Indices LLC (SPDJI)

Market Price

US$128.14 (26 Jan 2026)

+7.60% (YoY)

NAV

US$128.10

+0.03% Premium

Yield

1.44%

+22.03% (YoY)

Expense Ratio

6.00%

-89% vs Avg: 61.00%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF offers exposure to the small-capitalization sector of the U.S. equity market by tracking the S&P SmallCap 600 Index. It provides a cost-effective and diversified way to access over 600 small-cap U.S. companies. With an expense ratio significantly below the category average, IJR is a highly efficient vehicle for small-cap allocation. Bull case projects NAV reaching US$153.77 (+20%) while bear case suggests US$102.51 (-20%) over 12-18 months.

⚖️ Risk vs Reward

Small-cap equities are currently trading near their 10-year median P/E and P/B ratios, suggesting a fair valuation compared to historical norms. However, they remain at a discount relative to large-cap counterparts, offering potential for value-driven outperformance if economic conditions favor smaller companies. The sector carries higher inherent volatility and sensitivity to economic cycles compared to the broader market, making it more susceptible to significant drawdowns during downturns. Upside potential is driven by earnings growth and multiple expansion, while downside risk stems from economic contraction and rising interest rates. IJR's broad diversification helps mitigate single-stock risk within this volatile segment.

🚀 Why IJR Could Soar

• Small-cap companies typically exhibit stronger growth potential during economic expansions, offering higher earnings acceleration if the U.S. economy maintains momentum.
• Historical data suggests small-cap stocks tend to outperform large-cap counterparts during periods of declining interest rates or when the market seeks higher growth opportunities.
• Current valuations are attractive relative to large-caps, implying potential for multiple expansion as investors rotate into undervalued segments of the market.

⚠️ What Could Go Wrong

• Small-cap equities are highly sensitive to economic downturns, potentially leading to steeper earnings declines and underperformance during recessions.
• Rising interest rates disproportionately impact smaller companies, which often have higher debt burdens and less access to capital, potentially dampening growth prospects.
• Lower liquidity in small-cap stocks compared to large-caps can result in wider bid-ask spreads and higher trading costs, especially during periods of market stress.

🏢 Fund Overview

What Are You Actually Buying

The U.S. small-capitalization equity market comprises publicly traded companies with market capitalizations typically ranging from US$901.1 million to US$7.4 billion.
Small-cap companies often exhibit higher growth potential than large-cap firms due to their earlier stage in development, but this comes with increased risk and volatility.
This segment is highly diversified across various industries, with notable allocations to financials, industrials, and information technology sectors.

Market Dynamics & Outlook

Small-cap stocks currently present a mixed outlook, with some analysts highlighting their potential for mean reversion and outperformance relative to large-caps.
The segment is particularly sensitive to changes in economic policy, including interest rates and inflation, which can significantly influence investor sentiment and company performance.
Despite potential headwinds, the innovation and agility of smaller companies may drive growth, especially in niche markets or emerging industries.

🎯 Why This Matters

Investing in small-cap equities provides portfolio diversification and access to a segment of the market with historically higher growth potential. Understanding current economic sensitivity and valuation relative to large-caps is crucial for assessing risk and reward in this dynamic space.

📈 Valuation & Analysis

Historical Performance

YTD

+6.21%

+7.60%

Yearly Growth (3Y)

+10.12%

Yearly Growth (5Y)

+7.23%

Yearly Growth (10Y)

+9.76%

Yearly Growth (Since Inception)

+9.46%

Current Valuation

The iShares Core S&P Small-Cap ETF's underlying holdings currently trade at an aggregate price-to-earnings (P/E) ratio of 18.57x and a price-to-book (P/B) ratio of 1.96x as of January 23, 2026. This places IJR's valuation close to its 10-year median P/E of 18.3x and P/B of 1.91x, suggesting that the small-cap segment is currently trading around its historical average. The current trailing 12-month (TTM) yield stands at 1.44%. While not in bargain territory, the valuation metrics do not appear significantly stretched compared to their historical ranges, especially when considering the potential for growth in a favorable economic environment.

The Bull Case - Upside to

Robust Economic Rebound Fuels Growth

Medium Probability

If the U.S. economy experiences a stronger-than-expected rebound, small-cap companies could see average earnings growth of 15-20% over 12-18 months, potentially driving a 15% upside to the ETF's NAV.

Valuation Gap Closes Against Large-Caps

Medium Probability

Should investors rotate from historically expensive large-cap stocks into relatively undervalued small-caps, the small-cap P/E multiple could expand from 18.57x to 22x, contributing to an additional 10-15% NAV appreciation.

Decreasing Inflationary Pressures and Interest Rates

High Probability

A sustained decline in inflation leading to Federal Reserve rate cuts would reduce borrowing costs for small-cap companies and boost consumer spending, translating to a 10-12% NAV increase over the next year.

The Bear Case - Downside to

Economic Slowdown or Recession

Medium Probability

A material economic slowdown or recession could trigger a 20-25% decline in small-cap corporate earnings, potentially leading to a 20% downside in IJR's NAV as multiples compress.

Persistent High Interest Rates

Medium Probability

Should interest rates remain elevated or increase further, it would raise borrowing costs and reduce profitability for many small-cap companies, contributing to a 10-15% NAV decline.

Increased Volatility and Reduced Liquidity

High Probability

Periods of heightened market uncertainty could lead to increased volatility and reduced liquidity in the small-cap segment, potentially causing wider bid-ask spreads and accelerated NAV declines, possibly by 5-10%.

Risk/Reward Assessment

The risk-reward profile for IJR is currently balanced with a potential for both significant upside and downside. On the upside, a strengthening economy and investor rotation into value segments could propel small-cap earnings and valuations higher. The ETF's broad diversification across over 600 companies in the S&P SmallCap 600 Index offers a comprehensive way to capture this potential growth. However, the inherent volatility of small-cap stocks means that any economic headwinds or sustained high interest rates could disproportionately impact this segment. Investors should weigh the potential for robust growth during favorable cycles against the amplified risks during challenging economic periods. For long-term investors seeking diversified exposure to U.S. small-cap growth, IJR presents a compelling, low-cost option, but it requires a tolerance for higher volatility than large-cap investments.

Peer Comparison

IJR stands out among its peers for its exposure to the S&P SmallCap 600 Index, which is known for its profitability screens, potentially offering higher quality small-cap exposure than broader indices like the Russell 2000. Its expense ratio of 0.06% is highly competitive, only slightly higher than the cheapest options, ensuring cost-efficient access. While not the largest in terms of AUM, its substantial size provides ample liquidity. IJR's long track record since 2000 offers extensive historical performance data for investor analysis.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
iShares Core S&P Small-Cap ETF (IJR) ⭐	6.00%	US$96.0B	7.60%	10.12%	7.23%	1.44%
Vanguard Small-Cap ETF (VB)	5.00%	US$77.3B	10.47%	13.83%	7.23%	1.25%
Schwab U.S. Small-Cap ETF (SCHA)	4.00%	US$20.9B	14.77%	13.92%	6.16%	1.17%
SPDR Portfolio S&P 600 Small Cap ETF (SPSM)	3.00%	US$13.3B	9.01%	10.41%	6.59%	1.52%

🎯 Why This Matters

The valuation and peer analysis highlight IJR's role as a robust and cost-effective tool for small-cap equity exposure. Investors must weigh its efficient index tracking and strong liquidity against the inherent volatility of the small-cap segment, particularly when considering its historical performance against broader market indices.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	SOLS	S	SOLSTICE ADVANCED MATERIALS INC	Materials	0.6%
2	AEIS	A	ADVANCED ENERGY INDUSTRIES INC	Information Technology	0.6%
3	TTMI	T	TTM TECHNOLOGIES INC	Information Technology	0.6%
4	SANM	S	SANMINA CORP	Information Technology	0.6%
5	ARWR	A	ARROWHEAD PHARMACEUTICALS INC	Health Care	0.6%
6	LKQ	L	LKQ CORP	Consumer Discretionary	0.6%
7	IDCC	I	INTERDIGITAL INC	Information Technology	0.5%
8	MOG.A	M	MOOG INC CLASS A	Industrials	0.5%
9	CTRE	C	CARETRUST REIT INC	Real Estate	0.5%
10	AWI	A	ARMSTRONG WORLD INDUSTRIES INC	Industrials	0.5%

Fund Mechanics

How It Works

The iShares Core S&P Small-Cap ETF (IJR) is a passively managed exchange-traded fund designed to track the investment results of the S&P SmallCap 600 Index. This index, determined by S&P Dow Jones Indices LLC (SPDJI), measures the performance of the small-capitalization sector of the U.S. equity market. The fund employs a representative sampling strategy, meaning it invests in a select portfolio of securities that collectively aim to replicate the full index's performance, rather than holding every single security in the index. This approach helps to manage costs and enhance efficiency. The S&P SmallCap 600 Index is weighted by the float-adjusted market value of its outstanding shares, and its constituents generally have market capitalizations between US$901.1 million and US$7.4 billion at the time of inclusion. The index is also known for applying profitability screens, aiming to include higher quality small-cap companies compared to broader small-cap indices.

Holdings Breakdown

Number of Holdings

605

Top 10 Concentration

624.0%

Top 20 Concentration

987.0%

Turnover Rate

2500%

Category	Weight	Description
Finance	25.7%
Electronic Technology	10.4%
Health Technology	9.4%
Producer Manufacturing	8.1%
Technology Services	7.2%
Process Industries	5.2%
Retail Trade	4.5%
Consumer Durables	4.2%
Consumer Services	4.1%
Industrial Services	4.0%
Consumer Non-Durables	2.5%
Energy Minerals	2.3%
Utilities	2.2%
Commercial Services	2.1%
Transportation	2.0%
Health Services	1.6%
Distribution Services	1.3%
CASH	1.2%
Communications	0.9%
Non-Energy Minerals	0.8%
Miscellaneous	0.1%

Cost Efficiency

Expense Ratio

6.00%

Median Bid-Ask Spread

7.000%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	5.95%	6.02%	-0.07%	N/A	N/A	N/A
2024	8.61%	8.70%	-0.09%	N/A	N/A	N/A
2023	16.03%	16.05%	-0.02%	N/A	N/A	N/A
2022	-16.20%	-16.10%	-0.10%	N/A	N/A	N/A
2021	26.69%	26.82%	-0.13%	N/A	N/A	N/A

Annualized Return Since Inception

9.46%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
IJR ⭐	iShares Core S&P Small-Cap ETF	iShares	6.00%	US$96.0B	7.6%	10.1%	7.2%	1.44%	19.59%	0.29	7.000%
VB	Vanguard Small-Cap ETF	Vanguard	5.00%	US$77.3B	10.5%	13.8%	7.2%	1.25%	N/A	N/A	N/A
SCHA	Schwab U.S. Small-Cap ETF	Schwab	4.00%	US$20.9B	14.8%	13.9%	6.2%	1.17%	N/A	N/A	N/A
SPSM	SPDR Portfolio S&P 600 Small Cap ETF	State Street	3.00%	US$13.3B	9.0%	10.4%	6.6%	1.52%	N/A	N/A	N/A
Category Average			61.00%	—	10.4%	9.7%	5.2%	1.40%	—	N/A	—

Risk Metrics

Beta

1.23

Standard Deviation

1 Year	3 Years	5 Years	10 Years
N/A	19.59%	N/A	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	0.29	N/A	N/A

Sortino Ratio

3 Years	5 Years
0.48	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
N/A	N/A	-28.02%	-51.79%

Correlations

Liquidity & Trading

Volume

Avg Daily Shares

5,580,019

Avg Daily Dollar Volume

US$714.9M

Trend

null

Bid-Ask Spread

Metric	Value
Median (Percent)	7.000%
Median (Dollar)	US$0.09
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	2.76%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

null

Net Flows

Period	Net Flow
1 Year	US$-0.0M

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.