The BNY Mellon US Mid Cap Core Equity ETF (BKMC) is a passively managed exchange-traded fund (ETF) designed to provide investors with broad exposure to the Mid Cap Blend segment of the US equity market. Launched on April 9, 2020, and sponsored by BNY Mellon, BKMC has attracted over $495.10 million in assets, positioning it as a moderately sized ETF within its category.
Why Mid Cap Blend?
Mid-cap companies, with market capitalizations ranging between $2 billion and $10 billion, tend to offer a compelling blend of growth potential and reduced volatility compared to their larger (large-cap) and smaller (small-cap) counterparts. Their size allows them to demonstrate stability while also having the flexibility to expand rapidly. Blend ETFs are aptly named, as they typically hold a mix of growth and value stocks, exhibiting characteristics of both equity styles.
Cost-Effective Investment
One of the key strengths of BKMC is its low expense ratio. At just 0.04% annually, it ranks among the most cost-effective ETFs in its sector. Lower costs directly translate to better returns for investors, assuming all other factors remain constant. Additionally, BKMC boasts a 12-month trailing dividend yield of 1.39%, providing investors with a stream of passive income.
Sector Exposure and Top Holdings
ETFs are known for their diversification, minimizing single-stock risk. However, understanding an ETF’s holdings is still crucial before investing. BKMC’s portfolio is heavily weighted towards the Industrials sector, accounting for approximately 26.60% of total assets. Consumer Discretionary and Healthcare follow closely behind as the next largest sector allocations. Among individual holdings, GoDaddy Inc. – Class A (GDDY) comprises about 0.64% of total assets, followed by Leidos Holdings Inc (LDOS) and Texas Pacific Land Corp (TPL). The top 10 holdings collectively represent roughly 5.48% of total assets under management.
Performance and Risk
BKMC aims to mirror the performance of the MORNINGSTAR U.S. MID CAP INDEX before fees and expenses. The Morningstar US Mid Cap Index is a float-adjusted market capitalization weighted index intended to measure the performance of US medium-capitalization stocks. The ETF has delivered a return of approximately 9.48% year-to-date and has climbed about 21.08% over the past year (as of September 16, 2024). Over the past 52 weeks, its share price has traded between $75.04 and $99.80. BKMC exhibits a beta of 1.02 and a standard deviation of 19.22% for the trailing three-year period, indicating a level of volatility comparable to the broader market. With a portfolio of roughly 407 holdings, it effectively mitigates company-specific risk.
Alternative Options
BNY Mellon US Mid Cap Core Equity ETF currently holds a Zacks ETF Rank of 3 (Hold), a ranking based on expected asset class return, expense ratio, momentum, and other factors. This makes BKMC a suitable choice for investors seeking exposure to the Style Box – Mid Cap Blend segment of the market. However, investors may also consider alternative ETFs in the same space, such as the Vanguard Mid-Cap ETF (VO) and the iShares Core S&P Mid-Cap ETF (IJH). While VO boasts $67.95 billion in assets, IJH holds $88.17 billion. VO has an expense ratio of 0.04%, while IJH charges 0.05%.
Conclusion
Passively managed ETFs like BKMC are gaining popularity among both institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency. They offer an excellent vehicle for long-term investors seeking to participate in the growth potential of the US mid-cap market.
