Small-cap rally lifts Invesco’s XSMO after April gains

Invesco’s S&P SmallCap Momentum ETF (XSMO) advanced following a double-digit gain in its benchmark, the S&P SmallCap 600 Momentum Index, in April. The ETF had $2.77 billion in assets and 114 holdings at the most recent reporting.

XSMO tracks the S&P SmallCap 600 Momentum Index, which selects stocks using momentum measures rather than raw price change. S&P Dow Jones Indices noted, “The S&P Momentum Indices typically utilize 12-month risk-adjusted price momentum to select stocks ranked in the top quintile of their eligible universes. To account for short-term reversal effects, the most recent month is excluded when calculating price momentum.”

Holdings in XSMO are weighted by a combination of float-adjusted market capitalization and momentum scores. The index provider explained, “This approach effectively balances market weight with targeted factor exposure. The indices are rebalanced semiannually, with a 20% buffer rule to help reduce turnover.” The fund caps any single holding at 3.90% of the portfolio.

Sector allocations reflect where momentum scores are highest. At the time of the report, roughly 42% of XSMO’s weight was in industrial and technology stocks, and about 27% was in financial services and healthcare.

Performance figures released by the index provider show the S&P SmallCap 600 Momentum Index outpaced the broader S&P SmallCap 600 Index over the trailing one-, three-, five- and 10-year periods. The index provider also reported that the momentum gauges have shown favorable capture ratios, delivering higher or similar gains during up markets and experiencing smaller declines during down markets.

The ETF represents a small-cap implementation of a momentum factor, while Invesco offers other momentum products focused on larger-cap benchmarks for investors seeking different market-cap exposures.