This is an actively managed ETF that analyzes multiple factors (value, momentum, quality and others) across US-listed small-cap stocks to select its holdings. It uses Russell 2000 and Russell 3000 family indexes as reference benchmarks.

It suits small-cap investors who seek outperformance through active stock selection rather than passive index tracking.

The ETF is managed by First Trust using an active (actively managed) approach.

This is an active strategy that uses a multi-factor model (value, momentum, quality and others) to select US small-cap stocks with a higher potential for excess returns. Rather than replicating an index passively, it seeks to outperform its benchmark through the management team's active stock selection.

• Active, factor-based stock selection, unlike passive small-cap indexes
• Broad diversification across holdings helps reduce single-stock risk

Assets under management (AUM) stand at $134.8M, and the expense ratio is 0.75% per year.

It belongs to a family strategically similar to the active factor and rotation ETFs shown in the table, such as DYNF and THRO, and its fees tend to be higher than those of purely passive small-cap ETFs.

As is typical of the small-cap category, it is more volatile than large caps, and its relative performance has varied widely with interest rates and the economic cycle. Depending on how its active factor selection plays out, performance can deviate from the benchmark.

Inflows tend to expand when investor sentiment toward small caps improves, and the fund's money flows tend to move in line with the active small-cap ETF category as a whole.

Its strength is the potential for outperformance through active factor selection, while its weaknesses are higher fees than passive funds and uncertainty over management results.

The DYNF and THRO family shown in the table follows large-cap-focused active factor and rotation strategies and therefore belongs to a different asset class, while the JMEE and PSC family offers comparable strategies in the small- and mid-cap categories. Investors who want purely passive small-cap exposure have direct substitutes such as IWM and VTWO, which track the Russell 2000 directly, and IJR, which tracks the S&P small-cap index. For a finer split by value and growth styles, style variants such as SLYV and SLYG are also worth considering.

Here are the points to review before investing in AFSM. Because it is an active small-cap ETF, unlike passive index products, investors should check fees, volatility and management results together, and should also account for the risks specific to small caps.

Given the nature of small caps, declines can be larger than for large caps during an economic slowdown or a period of rising interest rates, and there is also a possibility that active management results fall short of the benchmark. Investors should also keep in mind that liquidity may be relatively more limited than for large passive ETFs.

The fund suits investors seeking small-cap outperformance through active factor selection, and if minimizing costs is the priority, passive small-cap ETFs such as IWM and IJR can serve as alternatives.