If You Invested in Hotchkis & Wiley SMID Cap Diversified Value Fund (HWSM)

The Hotchkis & Wiley SMID Cap Diversified Value Fund (Nasdaq: HWSM) is an exchange-traded fund (ETF) launched by Hotchkis & Wiley, a global investment manager that specializes in value equity and high yield strategies. According to the fund’s launch announcement, HWSM is the firm’s first actively managed ETF and began trading on March 31, 2025. The ETF is designed for investors seeking diversified exposure to small- and mid-cap value equities through an actively managed, research-driven approach.

HWSM applies Hotchkis & Wiley’s stated value investing philosophy, which combines quantitative analysis with fundamental research. The fund aims to exploit valuation anomalies in the small and mid-cap equity market, an area described as often underfollowed by Wall Street research. The investment team focuses on identifying undervalued companies with strong fundamentals that, in their view, are frequently overlooked.

The ETF is managed by an investment team led by portfolio managers Judd Peters and Ryan Thomes, supported by Hotchkis & Wiley’s broader research organization. The fund uses proprietary valuation models together with analyst-driven stock selection to construct a diversified portfolio of small- and medium-sized companies. The launch materials state that the portfolio is intended to consist of a broad set of undervalued businesses characterized by strong operations, robust balance sheets, and prudent governance.

Investment approach and portfolio characteristics

According to the launch description, the Hotchkis & Wiley SMID Cap Diversified Value Fund targets a diversified portfolio of approximately 150–200 stocks. The ETF focuses on companies within a market capitalization range that is described as approximately $2 billion to $50 billion. The portfolio is rebalanced monthly, and the process incorporates strict risk controls at both the individual stock level and the overall portfolio level, as outlined in the fund’s key features.

The fund’s process is described as analyst-driven, reflecting Hotchkis & Wiley’s emphasis on deep research. The firm states that it uses proprietary quantitative tools in combination with the judgment of its experienced research team to identify companies trading below what it views as their intrinsic value. The ETF structure is presented as a way to offer this active, value-oriented approach with the transparency and liquidity associated with exchange-traded funds.

Role within Hotchkis & Wiley’s product lineup

HWSM represents Hotchkis & Wiley’s first entry into the ETF market. The firm, founded in 1980 and based in Los Angeles, is described as overseeing actively managed equity and fixed income portfolios. The introduction of HWSM extends that active management capability into an ETF format, with the stated goal of meeting evolving client needs and bringing its value investing approach to a broader audience.

The Hotchkis & Wiley SMID Cap Diversified Value Fund is positioned as a vehicle for investors who are interested in small- and mid-cap value strategies and who prefer the trading flexibility of an ETF. The launch communication emphasizes that the fund is intended to provide diversified exposure to this segment while applying the firm’s disciplined investment process and risk controls.

Risk considerations

The fund’s disclosure highlights that investing involves risk and that principal loss is possible. It notes that investing in small- and medium-sized companies involves greater risks than investing in larger companies. The materials also state that diversification does not assure a profit and does not protect against loss in a declining market.

The disclosure further explains that ETFs are subject to risks that do not apply to conventional mutual funds. These include the possibility that an ETF’s market price may trade at a premium or discount to its net asset value (NAV), that an active secondary market may not develop or be maintained, and that trading may be halted by the exchange on which the ETF trades. It is also noted that ETF shares are bought and sold at market price, which may be higher or lower than NAV, are not individually redeemed from the fund, and that brokerage commissions will reduce returns.

The launch information also points out that new funds have limited operating histories for investors to evaluate, and that new and smaller funds may not attract sufficient assets to achieve investment and trading efficiencies. Investors are directed in the disclosure to review the fund’s prospectus or summary prospectus for a full discussion of risks, charges, and expenses.

Issuer background

Hotchkis & Wiley Capital Management is described as a global investment manager based in Los Angeles and founded in 1980. The firm is said to oversee actively managed equity and fixed income portfolios and to specialize in value equity and high yield strategies. HWSM extends this value-focused approach into the small- and mid-cap equity space through an ETF structure.