It is an actively managed ETF that diversifies across stocks of US small and mid-sized companies within the range of the Russell Midcap and Russell 2500 indexes. Portfolio managers select the individual stocks and allocate most of net assets to small and mid-cap stocks.

It suits investors who want to diversify across small and mid-cap stocks, which have greater growth potential than large caps, and who are willing to accept the volatility that comes with them.

It is an ETF run by Morgan Stanley using an active (actively managed) approach.

The fund defines small and mid-sized companies based on the upper market capitalization range of the Russell Midcap and Russell 2500 indexes, and its managers select stocks within that range and hold them broadly. With a large number of holdings and low weights for individual stocks, the diversified structure gives exposure to the performance of small and mid-cap stocks as a whole.

• Active small and mid-cap stock selection by portfolio managers
• Diversified portfolio with a large number of holdings

Assets under management (AUM) stand at $688.8M, and the total expense ratio is 0.62% per year.

Unlike ETFs centered on large caps, it is exposed to small and mid-cap stocks, which offer greater growth potential but also tend to be more volatile, and because of its active management its fees are higher than those of passive mid-cap ETFs.

Small and mid-cap stocks tend to react sensitively to the economic cycle and risk appetite. When the economy is recovering and risk appetite is strengthening, they can deliver more resilient performance than large caps, but during economic slowdowns or risk-off periods their volatility can be greater.

Money tends to flow into small and mid-cap ETFs when risk appetite rises, and when market uncertainty increases, capital sometimes shifts toward relatively safer large caps. Fund flows vary with the economic cycle.

Its strength is diversified exposure to the high growth potential of small and mid-cap stocks, while its weaknesses are volatility and the burden of active management fees.

IJH, VO, IWR and others shown in the table are lower-fee passive mid-cap ETFs, and MDY and SPMD also track mid-cap indexes. To hold mid-cap stocks at a lower fee, you can also compare SCHM; for extended market exposure that excludes large caps, VXF; and to focus on small caps, IJR. These products differ in market capitalization range, management style and fees, so it is best to choose according to your investment profile.

Here are the points to review before investing in MSSM. As an active small and mid-cap ETF, it is important to check volatility, economic sensitivity, fee level and management style in advance.

By nature, small and mid-cap stocks are more volatile than large caps, and losses can widen during economic slowdowns or risk-off periods. The higher fees that come with active management can also affect long-term returns.

It is an active ETF suited to investors who want to diversify across small and mid-cap stocks with greater growth potential than large caps. If low-cost diversification is your priority, a passive mid-cap ETF may be the better choice, while MSSM can be an alternative for those who want active selection.