SQLV - Legg Mason Small-Cap Quality Value ETF

A (SQLV)

HIGHLIGHTS

Legg Mason Small-Cap Quality Value ETF (SQLV) seeks to provide capital appreciation by tracking the investment results of an index composed of small-cap stocks trading in the United States that have relatively low valuations.

  • SQLV is designed for investors seeking growth of capital through strategic multi-factor, small-cap exposure in an ETF wrapper.  

Strategy Differentiators

  • Focuses on high quality, US-traded small-cap stocks with relatively low valuations
  • Uses a proprietary, multi-factor scoring system that emphasizes high profitability companies (Quality) selling at attractive valuations (Value)
  • Thoughtfully combines strategic factors—based on decades of insights from highly-regarded small-cap practitioners—all in an ETF wrapper

Investment Overview

  • Uses a strategic, multi-factor approach that generally favors small-cap stocks with lower than average valuation, higher than average profitability and higher than average debt coverage.
  • Fundamental weighting aims to add value by relying on more efficient estimations of the companies’ true economic value than those provided by market capitalization. Targets lower exposure to overvalued companies, while still maintaining broad diversification.
  • Based on Royce’s decades of experience managing small-cap stocks as well as academic research on the favorable attributes of certain stock factors.

Meet your managers

Royce is a small-cap specialist with unparalleled knowledge and experience, offering distinct investment approaches to meet a variety of investors’ goals.


George Necakov, CFA, (industry since 1994) has been the Portfolio Manager, and Michael Connors (industry since 2003) has been the Assistant Portfolio Manager of the fund since its inception.

Royce & Associates, established in 1972, is dedicated to managing portfolios of small- and micro-cap US companies. Based in New York and with over four decades of small-cap investment experience, the firm uses a disciplined value approach to portfolio management.

Legg Mason's unique structure provides you with access to this specialized expertise. We offer a powerful portfolio of solutions through our independent investment management firms.

George Necakov, CFA

Portfolio Manager, Principal, Director of Quantitative Strategies

Michael Connors

Director of Portfolio Analytics

The Legg Mason Small-Cap Quality Value ETF seeks to track the investment results of the Royce Small-Cap Quality Value Index which is a proprietary index composed of small-cap stocks trading in the United States with relatively low valuations, high profitability and high debt coverage compared with the average of stocks in the investment universe. The ETF will invest at least 95% of its total assets in component securities of the Royce Small-Cap Quality Value Index. The Index construction rules have been developed based on Royce’s decades of experience managing small-cap stocks as well as academic literature on the favorable attributes of certain stock factors. As a result, the Index will generally favor stocks with lower than average valuation, higher than average profitability and higher than average debt coverage compared with stocks in the investment universe. Additionally, the Index construction rules were chosen to seek to maintain diversification by limiting the weighting of individual constituents as well as sectors. Index constituents are chosen from a universe of small-cap stocks which meet certain criteria. The investment universe includes common stocks of US headquartered companies listed on US exchanges, and excludes royalty companies, master limited partnerships, stocks with a share price less than or equal to $1 and stocks with insufficient trading volume. The universe is then refined to include stocks with market capitalizations that are between the 1001st and 3000th largest stocks based on descending market capitalization at time of rebalance. From that universe REITs are excluded and Index constituents are selected using a proprietary, multi-factor scoring system. Index position weights are then calculated using a fundamental composite score that aims at adding value by relying on more efficient estimations of the companies’ true economic value than those provided by market capitalization. By using fundamental factors to weight stocks rather than market capitalization the index seeks to have lower exposure to overvalued companies, while still maintaining broad diversification. Concentration limits are also implemented in the construction process of the Index. The Index constituents are reconstituted and rebalanced quarterly. 

What I Should Know
Before Investing

The Fund is newly organized, with a limited history of operations. Equity securities are subject to price fluctuation and possible loss of principal.  The Fund invests primarily in small-cap stocks, which may involve considerably more risk than investing in larger-cap stocks.  The Fund has significant exposure to U.S. issuers. A decrease in imports or exports, changes in trade regulations and/or an economic recession in the United States may have a material adverse effect on the U.S. economy and the securities listed on U.S. exchanges.  There is no guarantee that the Fund will achieve a high degree of correlation to the index it seeks to track. The Fund does not seek to outperform the index it tracks, and does not seek temporary defensive positions when markets decline or appear overvalued.  The Fund may focus its investments in certain industries, increasing its vulnerability to market volatility. Diversification does not ensure gains or protect against market declines. 

IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus for this and other information. Read it carefully. 

Authorized participants ("APs") may acquire shares in the primary market directly from the ETFs and may tender their shares for redemption directly to the ETFs, at net asset value per share only in Creation Units or Creation Unit Aggregations. Once created, shares of the funds generally trade in the secondary market in amounts less than a Creation Unit.

Retail investors buy and sell shares of ETFs at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for purchase or redemption directly from the ETF. Market price returns are based upon the mid-point of the National Best Bid and Offer (NBBO) when the ETF’s NAV is determined, which is typically 4 p.m. Eastern time (US). 

Legg Mason Investor Services, LLC (LMIS) serves as the distributor of Creation Units for the ETFs on an agency basis. LMIS does not maintain a secondary market in the funds' shares. 

If you are neither a resident nor a citizen of the United States or if you are a non-U.S. entity, the ETF's ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. federal withholding tax, unless a lower treaty rate applies. For further information, please see each fund’s prospectus.

Redemption payments will be effected within the specified number of calendar days following the date on which a request for redemption in proper form is made.  Please see each fund’s statement of additional information (SAI) for more information.  

FINANCIAL ADVISORS: Please note that not all products may be available for sale at your firm. Please call the Legg Mason Sales Desk 1-800-822-5544 or your Legg Mason Sales contact for more information.

Exchange Traded Funds (ETFs) — A type of investment company which is bought and sold on a securities exchange. ETFs generally represent a portfolio of securities, derivative instruments, currencies or commodities. The risks of owning an ETF generally reflect the risks of owning the underlying securities or commodities the ETF is designed to track. ETFs also have management fees and operating expenses that increase their costs.

Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

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Performance shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than the original cost. Market price returns are based upon the mid-point of the National Best Bid and Offer (NBBO) when the ETF’s NAV is determined, which is typically 4 p.m. Eastern time (US). These returns will not represent your returns had you traded shares at other times.

Shareholders may pay more than net asset value when they buy Fund shares and receive less than net asset value when they sell those shares, because shares are bought and sold at current market prices. 

*Distribution rate is calculated by annualizing the most recent distribution amount paid, excluding special distributions, divided by the closing market price or NAV. 

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IMPORTANT HOLDINGS INFORMATION: Portfolio holdings are based on total portfolio, and are subject to change at any time. Holdings are provided for informational purposes only and should not be construed as a recommendation to purchase or sell any security. Any negative allocations or allocations in excess of 100% are primarily due to unsettled trade activities.

IMPORTANT INFORMATION: All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Please see each product’s webpage for specific details regarding investment objective, risks, performance and other important information. Review this information carefully before you make any investment decision. Investors cannot invest directly in an index, and unmanaged index returns do not reflect any fees, expenses or sales charges.

Carefully consider a fund’s investment objectives, risks, charges and expenses before investing. Please view the prospectus or summary prospectus for this and other information. Read it carefully. 

Authorized participants ("APs") may acquire shares in the primary market directly from the ETFs and may tender their shares for redemption directly to the ETFs, at net asset value per share only in Creation Units or Creation Unit Aggregations. Once created, shares of the funds generally trade in the secondary market in amounts less than a Creation Unit.

Retail investors buy and sell shares of ETFs at market price (not NAV) in the secondary market throughout the trading day. These shares are not individually available for purchase or redemption directly from the ETF. Market price returns are based upon the mid-point of the National Best Bid and Offer (NBBO) when the ETF’s NAV is determined, which is typically 4 p.m. Eastern time (US). 

Legg Mason Investor Services, LLC (LMIS) serves as the distributor of Creation Units for the ETFs on an agency basis. LMIS does not maintain a secondary market in the funds' shares. 

If you are neither a resident nor a citizen of the United States or if you are a non-U.S. entity, the ETF's ordinary income dividends (which include distributions of net short-term capital gains) will generally be subject to a 30% U.S. federal withholding tax, unless a lower treaty rate applies. For further information, please see each fund’s prospectus.

Redemption payments will be effected within the specified number of calendar days following the date on which a request for redemption in proper form is made.  Please see each fund’s statement of additional information (SAI) for more information.  

FINANCIAL ADVISORS: Please note that not all products may be available for sale at your firm. Please call the Legg Mason Sales Desk 1-800-822-5544 or your Legg Mason Sales contact for more information.

Exchange Traded Funds (ETFs) — A type of investment company which is bought and sold on a securities exchange. ETFs generally represent a portfolio of securities, derivative instruments, currencies or commodities. The risks of owning an ETF generally reflect the risks of owning the underlying securities or commodities the ETF is designed to track. ETFs also have management fees and operating expenses that increase their costs.

Legg Mason, Inc., its affiliates, and its employees are not in the business of providing tax or legal advice to taxpayers. These materials and any tax-related statements are not intended or written to be used, and cannot be used or relied upon, by any such taxpayer for the purpose of avoiding tax penalties or complying with any applicable tax laws or regulations. Tax-related statements, if any, may have been written in connection with the “promotion or marketing” of the transaction(s) or matter(s) addressed by these materials, to the extent allowed by applicable law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.

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Distributions are not guaranteed and are subject to change.

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