SFLO ETF targets U.S. small caps with high free cash flow

The VictoryShares Small Cap Free Cash Flow ETF (SFLO) invests in U.S. small-cap companies selected for high expected free cash flow. The fund follows the Victory U.S. Small Cap Free Cash Flow Index, which applies a multi-stage quality screen to the small-cap universe rather than selecting solely by market-cap range.

The index defines Expected FCF as the average of a company’s trailing 12-month free cash flow and consensus next-12-month free cash flow estimates. Constituents are ranked by FCF yield, with enterprise value used as the denominator. Using enterprise value gives relatively greater weight to companies with lower net debt or stronger balance sheets than measures that use market capitalization.

Holdings cover multiple industries. Names that have appeared among top positions include Oscar Health, Scorpio Tankers, Symbotic, Lyft and Tutor Perini. As of May 31, 2026, SFLO’s top ten holdings were Oscar Health, Jazz Pharmaceuticals, Peloton, Lyft, Crocs, SM Energy, Scorpio Tankers, Symbotic, Penguin Solutions and TD SYNNEX, with individual weights in the low single digits.

The index incorporates a forward-looking component through next-12-month analyst estimates, aiming to capture firms with recent cash generation and visible near-term improvement in cash flow. The index is rebalanced and reconstituted quarterly. The ETF’s net expense ratio is 0.49% and the gross expense ratio is 0.56%.

The strategy responds to a market where higher interest rates have raised the cost of capital. The index’s screens favor companies with consistent cash generation and stronger balance sheets to limit exposure to firms that may need frequent external financing.

The fund carries risks common to small-cap and factor-based strategies. Smaller companies generally show higher price volatility. Concentrating on free cash flow can underperform during periods when markets favor companies priced for growth or cyclical turnarounds that have not yet converted earnings into cash. Sector concentration and company-specific events can affect cash generation. ETF share prices can trade at a premium or discount to net asset value, and large shareholders can influence fund flows and tax outcomes for other investors.

Index licensing is provided by VettaFi LLC for a fee; VettaFi is not the issuer, sponsor or seller of SFLO and has no responsibility for the ETF’s administration or trading. The fund prospectus lists additional risks, including exposures to energy and consumer discretionary sectors, use of derivatives, geopolitical events and technology disruptions. Investors are advised to read the prospectus for a full description of objectives, risks, charges and expenses before investing.