This is a passive ETF that diversifies across small companies in developed markets (excluding the US) using a fundamental index methodology. It selects and weights stocks based on five-year averages of core financial metrics such as sales, cash flow, and dividends, and it is managed with a disciplined approach of rebalancing quarterly to reduce overvalued stocks and increase undervalued ones.

It suits long-term investors who want diversified exposure to developed-market small caps outside the US while pursuing a fundamentals-based value tilt.

It is a passive (index-tracking) ETF launched in 2013 by Schwab Asset Management.

Instead of market capitalization, it adopts a fundamental index approach that selects stocks and sets weights based on five-year average financial metrics: sales, cash flow, dividends, and share buybacks. This approach reflects a company's economic size, and it has a contrarian character: during regular rebalancing, it automatically reduces the weight of relatively overvalued stocks and increases that of undervalued ones.

• Financial-metric-based weighting strengthens exposure to value stocks and low price-to-book stocks compared with market-cap-weighted approaches
• A systematic contrarian process of adding and removing holdings through quarterly rebalancing

Assets under management (AUM) stand at $3.1B, and the expense ratio is 0.39% per year.

It belongs to the same Schwab fundamental series as the similar fundamental index ETFs FNDF (developed-market large caps) and FNDE (emerging markets), and it covers the small-cap segment.

International small caps tend to be relatively weak when the dollar is strong, and their chances of outperforming rise when the dollar weakens and the global economy recovers. Because of the nature of the fundamental index approach, the weighting in cyclical and value stocks is higher than in pure market-cap-tracking funds, so relative performance can vary with the interest rate environment and the economic cycle.

The international developed-market small-cap category draws less investor interest than US large caps, but it is a segment that sees steady inflows driven by diversification goals and demand to reduce US concentration. Inflows tend to arrive as awareness of the fundamental index approach grows and during periods when value stocks are in favor.

Its strengths are the disciplined management of the fundamental index approach and broad diversification, while currency exposure and liquidity constraints are points to watch.

FNDF, shown in the table, is the developed-market large-cap version of the same Schwab fundamental series, and it is a direct substitute if you want large- and mid-cap exposure instead of small caps. GSIE is Goldman Sachs' developed-market small-cap ETF and serves as a comparison, while GUNR and GNR are global natural resources ETFs with a different sector character. Pure market-cap-weighted developed-market small-cap ETFs such as SCHC, SCZ, DLS, and GWX are also alternatives, and it is best to choose after checking differences in expense ratios and index methodology.

FNDC is an ETF that invests in international developed-market small caps using a fundamental index approach. Diversification benefits and value characteristics are strengths, but currency exposure, small-cap liquidity, and an understanding of the methodology are essential to confirm before investing.

Given the nature of international small caps, there are combined risks from currency, liquidity, and the economic cycle. Losses can widen during periods of a strong dollar and a global recession, and in market environments where value preference is weak, relative returns can be lower than those of market-cap-weighted ETFs.

It is a suitable ETF for investors who want to approach international developed-market small caps through a fundamental index method. If you prefer a market-cap-weighted approach or prioritize liquidity, consider alternatives such as SCHC and DLS, and if you want to focus on large caps, consider FNDF alongside it.