Mid- and small-cap ETFs tracking S&P DJI indices have trailed peer funds that track other indices, year to date as of July 22, 2025. The iShares Core S&P Mid-Cap ETF (IJH), the Vanguard Mid-Cap ETF (VO), and iShares Russell Mid-Cap ETF (IWR) are the three largest ETFs in the U.S. that provide targeted exposure to U.S. mid-cap stocks. However, as of July 22, 2025, IJH had a price return of 2.5% YTD, trailing the 8.2% and 6.9% price returns for VO and IWR, respectively, over the same period (see Figure 1).
Similarly, the iShares Core S&P Small-Cap ETF (IJR) had a negative price return of 2.1% YTD as of July 22, 2025, while the iShares Russell 2000 ETF (IWM) and Vanguard Small-Cap ETF (VB) were up 1.0% and 1.9% YTD, respectively.
Top Stock Contributors to Returns of U.S. Mid-Cap ETFs
The relative underperformance of IJH is explained by its tilt toward relatively smaller-cap names rather than by differences in sector exposure. IJH, VO, and IWR all have similar sector exposures. However, there are several stocks that are held in the latter two better-performing ETFs, which are not held in IJH. These stocks tend to be larger-cap cyclical names like Palantir Technologies (PLTR) and Coinbase Global (COIN) that bounced back sharply from the April 8 market bottom.
The stocks that contributed the most to the returns of VO and IWR YTD are not held by IWR. Table 1 shows the top five stocks that contributed the most to the 2025 return of these three U.S. mid-cap ETFs. Stocks like PLTR, Robinhood Markets (HOOD), Roblox Corporation (RBLX), and COIN contributed the most to IWR’s return this year. However, none of these are held by IJH. Similarly, none of the top five stocks that contributed to VO’s 2025 return are held in IJH. In contrast, of the top five stocks contributing to IJH’s return, four are held by IWR. IWR holds more than twice the number of stocks held by IJH, so it has exposure to relatively larger-cap names, while still holding some of the smaller-market-cap names held by IJH.
Index Methodologies Explain IJR’s Tilt to Smaller-Cap Names
The target market-cap range for IJH is lower than that of VO and IWR, and therefore it underperforms relative to these peers in an environment where large caps outperform mid- and small-cap stocks. Conversely, IJH has historically outperformed VO and IWR when smaller-cap stocks outperform large caps. VO and IWR exclude mega-cap stocks but would include several stocks that would be considered large caps by S&P DJI’s criteria and therefore would be more likely to be included in the large-cap S&P 500 rather than the S&P MidCap 400. For example, PLTR was added to the S&P 500 in September 2024 but dropped from the CRSP US Mid Cap Index and the Russell Midcap Index only in 2025. COIN and Howmet Aerospace (HWM) are other examples of stocks that are held in VO and IWR but not in IJH since they are constituents of the S&P 500.
Relative Underperformance of S&P DJI Index-Linked Small-Cap ETFs
A similar trend has played out in the small-cap category, where S&P DJI-linked small-cap ETFs have underperformed their indexed peer ETFs due to a narrower base of constituent holdings and a tilt toward smaller market-cap firms. The CRSP U.S. Small Cap Index has a target market-cap range of 85th–99.5th percentile of total U.S. market cap. VB, which tracks this index, is therefore likely to hold relatively larger market-cap companies than IJR, whose underlying S&P SmallCap 600 has a target market-cap range of 93rd–99th percentile of U.S. total market cap.
Several stocks that have contributed the most to VB’s return this year are held in the large-cap S&P 500 rather than in the S&P SmallCap 600. This includes NRG Energy (NRG) and Jabil (JBL). As a result, VB benefits from a large-cap boost in the current market environment that IJR lacks, explaining the latter’s relative underperformance.
Looking Ahead
Since the recovery from the 2022 equity market downturn, we have been in a mega-cap-driven market environment in which companies with larger market caps have outperformed small caps. An environment like this will continue to favor mid- and small-cap ETFs linked to CRSP and Russell indices, since S&P DJI’s indices tend to skew to the relatively smaller end of the market-cap scale. If we eventually return to an environment where small caps outperform large caps, then the S&P DJI-linked ETFs will have an opportunity to catch up to their Russell and CRSP-linked ETF peers in return performance.
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