Exchange-traded funds can offer a simple and inexpensive way to gain exposure to US small-cap stocks, and some of these are highly rated by Morningstar’s fund analysts. This comes at a time when American small caps had a strong start to the year, overperforming both US large caps and global equity markets.
In 2026, the Morningstar US Small Cap Market Index gained 15% through July 14 in euro terms. That compares with a 12% gain in the Morningstar US Large Cap Market Index over the same period.
Ben Snider, Goldman Sachs’ chief US equity strategist, wrote in a recently published note that the three key catalysts for US small caps’ recent outperformance were the artificial intelligence industry, a strong economic backdrop and a boost in biotechnology stocks.
According to Snider and his team, about 40% of the small-cap index’s year-to-date returns can be attributed to AI infrastructure stocks, while it also benefited from avoiding the slump of ‘Magnificent Seven’ stocks, which delivered no returns for the S&P 500 in the first half of 2026.
Goldman also highlighted that a resilient economic backdrop and a pickup in healthcare M&A activity have supported small-cap performance. So far this year, stocks in the small-cap benchmark Russell 2000 have outpaced the S&P 500 in nine of 11 sectors, with biotechnology contributing about 10% of the index’s year-to-date return.
Screening For the Best US Small Cap Equity ETFs
To help investors find ETFs focused on this segment, we’ve screened 19 ETFs in Morningstar’s US small-cap equity category for those with Gold Medalist Ratings.
A Gold Medalist Rating means our analysts believe a fund has the greatest chance of outperforming its category over the long term.
A number of different providers make the list:
- L&G Russell 2000 US Small Cap Quality UCITS ETF RTWO
- iShares S&P SmallCap 600 UCITS ETF IUS3
- State Street SPDR MSCI USA Small Cap Value Weighted UCITS ETF ZPRV
- iShares MSCI USA Small Cap CTB Enhanced ESG UCITS ETF CUS1
- Invesco S&P SmallCap 600 UCITS ETF SMLK
None of the five ETFs that made it through the screen is actively managed. They track four different benchmarks.
Here’s a closer look at the strategies:
L&G Russell 2000 US Small Cap Quality UCITS ETF RTWO
- Morningstar Medalist Rating: Gold
- Fund Size: EUR 185.9 million
- Ongoing Charge: 0.30%
- Benchmark: Russell 2000 0.4 Quality Target Exposure Factor Index
The L&G Russell 2000 US Small Cap Quality UCITS ETF rose 33.95% over the past year. The gain on the passively managed fund beat the 28.71% gain on the average fund in the US small-cap equity category. The fund beat its Category benchmark, the Morningstar US Small Cap Extended Market Index, by 6.43 percentage points. Year to date, the Legal & General fund rose 23.39%, while the average fund in its category rose 19.81%.
It tracks the Russell 2000 0.4 Quality Target Exposure Factor Index, a benchmark by FTSE Russell designed to skew standard US small-cap equity exposures toward companies with stronger profitability and lower leverage. It actively tilts the weights of Russell 2000 constituents to maintain a targeted active quality factor exposure of exactly 0.4. It holds approximately 1,000 stocks.
iShares S&P Small Cap 600 UCITS ETF USD IUS3
- Morningstar Medalist Rating: Gold
- Fund Size: EUR 2.8 billion
- Ongoing Charge: 0.30%
- Benchmark: S&P SmallCap 600 NR USD
The iShares S&P Small Cap 600 UCITS ETF rose 31.45% over the past year. The fund beat the Morningstar US Small Cap Extended Market Index, by 3.93 percentage points. Year to date, the iShares fund rose 23.54%.
The S&P SmallCap 600 is a benchmark index measuring the US small-cap equity market that tracks the performance of 600 of the smallest publicly traded US companies.
State Street SPDR MSCI USA Small Cap Value Weighted UCITS ETF ZPRV
- Morningstar Medalist Rating: Gold
- Fund Size: EUR 934.8 million
- Ongoing Charge: 0.30%
- Benchmark: MSCI USA Small Cap Value Weighted NR USD
The State Street SPDR MSCI USA Small Cap Value Weighted UCITS ETF rose 32.79% over the past year, beating the Morningstar US Small Cap Extended Market Index by 5.27 percentage points. Year to date, the State Street fund rose 21.49%.
It follows the MSCI USA Small Cap Value Weighted index, which holds over 1,600 names and tracks small cap US stocks weighted by four fundamental accounting variables (sales, earnings, cash earnings and book value) and then reweighs each security of the parent index to emphasize stocks with lower valuations.
iShares MSCI USA Small Cap CTB Enhanced ESG UCITS ETF CUS1
- Morningstar Medalist Rating: Gold
- Fund Size: EUR 2.8 billion
- Ongoing Charge: 0.43%
- Benchmark: MSCI USA Small Cap ESG Enhanced CTB Index
The iShares MSCI USA Small Cap CTB Enhanced ESG UCITS ETF rose 31.45% over the past year. The fund beat the Morningstar US Small Cap Extended Market Index by 3.93 percentage points. Year to date, the iShares fund rose 21.13%.
The benchmark, the MSCI USA Small Cap ESG Enhanced CTB Index, is designed to track US small-cap equities while meeting the minimum standards of EU Climate Transition Benchmarks (CTB). It maximizes exposure to companies with high ESG (Environmental, Social, and Governance) scores while cutting carbon emissions intensity by 30% relative to the standard parent index. The portfolio currently includes approximately 1,500 companies.
Invesco S&P SmallCap 600 UCITS ETF SMLK
- Morningstar Medalist Rating: Gold
- Fund Size: EUR 348 million
- Ongoing Charge: 0.14%
- Benchmark: S&P SmallCap 600 NR USD
The EUR 348 million Invesco S&P SmallCap 600 UCITS ETF rose 33.27% over the past year. The fund beat its Category benchmark, the Morningstar US Small Cap Extended Market Index, by 5.75 percentage points. Year to date, the Invesco fund rose 24.63%.
