This international small-cap ETF tracks only small-cap stocks from developed markets outside the US. It uses an FTSE developed-market small-cap index series as its benchmark and selects its holdings on a market-capitalization-weighted basis.

It suits long-term investors who want to add small-cap exposure to a globally diversified portfolio.

It is a passive (index-tracking) ETF managed by Schwab.

The fund holds a broad range of small caps from the lower end of the market-capitalization range in developed markets outside the US, spreading its exposure evenly across countries and sectors. Rebalancing is reflected automatically each quarter according to the index methodology.

• Low expense ratio within the international small-cap category
• Broad diversification across many countries

Assets under management (AUM) stand at $5.5B, and the expense ratio is 0.06% per year.

Unlike the large-cap-focused international ETFs shown alongside it in the table, such as VEA, IEFA and VXUS, this fund specializes in small caps, which gives it a complementary role.

International small caps tend to be more volatile than large caps, and their performance has diverged depending on exchange rates and the economic conditions of individual countries. There are also frequent periods when they move differently from large-cap-focused international ETFs.

While demand for international diversification continues, fund inflows tend to increase when the valuation appeal specific to small caps comes into focus. When concerns about overconcentration in US assets grow, the fund also draws attention as a means of international diversification.

Its strengths are a low expense ratio and broad diversification across international small caps, though there are also drawbacks in terms of liquidity and volatility.

Large-cap-focused international ETFs shown in the table, such as VEA, IEFA and VXUS, complement SCHC, a small-cap specialist, across the market-capitalization spectrum, and broad global equity ETFs such as VT are also useful points of comparison. Products such as SCZ are direct substitutes focused on international small caps, and investors who want to extend exposure to emerging-market small caps can also consider EWX.

Here are the points to review before investing in SCHC. The volatility and currency exposure specific to international small caps should be checked in advance, and its division of roles with large-cap-focused international ETFs should also be considered.

Given the nature of small caps, volatility can increase during sharp market swings, and exposure to multiple currencies means exchange rate movements also have an effect. The fund may also react relatively sensitively to political and economic variables in individual countries.

It is an option to consider when adding small-cap exposure to a globally diversified portfolio. If large-cap-focused exposure is already sufficient, using SCHC to fill out the market-capitalization spectrum can be an effective strategy.