In a market where allocations to smaller U.S. companies often go underserved, the Alpha Blue Capital US Small-Mid Cap Dynamic ETF (ticker: ABCS) offers a differentiated approach to engaging the lower third of the U.S. equity market by capitalization. Through a combination of active stock selection and strategic use of passive index exchange-traded funds (ETFs), ABCS aims to help advisors build more complete exposure to companies that fall outside the large-cap spectrum—an area that is frequently overlooked in benchmark-driven portfolios.
In an interview with The Wealth Advisor’s Scott Martin, David Dabora, Founder, Managing Partner, and Portfolio Manager of Alpha Blue Capital, discussed the investment process behind ABCS, the flexibility of its dynamic structure, and why it may appeal to advisors looking to strengthen equity exposure without overcomplicating portfolio construction.
Expanding Small-Mid-Cap Exposure with a Flexible Toolkit
Many advisors recognize the potential of small- and midcap stocks but struggle to efficiently access and manage that segment. Dabora created ABCS to address what he sees as a persistent gap in coverage—especially in a market that’s grown increasingly top-heavy.
“Our ETF is a small-mid cap, dynamic ETF, and it’s very much an active strategy,” Dabora says. “But we also are able to use the passive element. We use the Vanguard small and midcap, passive CRSP Index ETFs, as well, as part of our strategy, which is unique.”
Rather than chasing a narrow slice of the market, ABCS targets a wider swath of the investable small- and midcap universe—spanning from about $500 million in market cap to $70 billion, with occasional exposure to companies above that range. According to Dabora, this broader footprint reflects the reality that many advisors need a more consolidated solution for their clients.
“Most investors, institutionally, family offices, or individually, need an integrated, complete package of small-mid, which is essentially the bottom 30%,” he explains. This comprehensive approach contrasts with the narrow focus of the Russell 2000 ETF (IWM), which targets only the bottom 7% of the market by capitalization.
Why Combine Active and Passive? Risk Management Meets Opportunity
ABCS is not just about capturing a market segment. It’s designed to do so with flexibility—balancing return potential with a risk-managed approach. The strategy dynamically allocates between a portfolio of 100–150 individual stocks and up to six Vanguard CRSP small- and mid-cap ETFs. At launch, roughly 65% of the portfolio was in individual equities and 35% in passive exposure.
The hybrid construction serves a dual purpose: allowing the team to emphasize conviction-based ideas while maintaining diversified exposure when active opportunities are less compelling. Dabora points out that market volatility, especially in the small-cap space, demands both tactical awareness and deep bottom-up analysis.
“There’s just an incredible amount of market participants that are not really paying attention to the underlying fundamentals of the companies,” Dabora observes, noting the opportunity this creates for active managers willing to do the research. The Russell 2000 ETF (IWM), he points out, “is one of the most traded ETFs out there” but represents purely passive exposure without the fundamental analysis that can uncover value.
“We have the element of picking up the market action through passive investment. That’s a risk management tool, but we can also adjust for style, blend value, growth and size, small and mid.”
The strategy’s high active share—approaching 80%—reflects this commitment to differentiated positioning while incorporating the diversification benefits of the passive component.
The Four-Level Framework That Drives Stock Selection
At the heart of the ABCS strategy is a process Dabora refers to as the “four levels of bottom-up stock selection.” Grounded in decades of institutional experience, the process balances quantitative screening with qualitative analysis and strict portfolio discipline.
“First and foremost, we’re value focused,” Dabora says. “Valuation matters, but also growth matters. So that’s level one—we’ve got to look at the value and the growth.”
This value-oriented approach doesn’t rely solely on traditional metrics. “We’re not dogmatic about cheap price to book or price to earnings,” Dabora explains. “We recognize companies have intangibles; there’s other qualities. So, you have to be flexible about how you’re looking at valuation.”
Level two focuses on fundamentals and quality—seeking companies with strong balance sheets, durable competitive advantages, and clear business strategies. Level three assesses business momentum: identifying companies showing improving revenue, earnings, or other signs of operational strength that could lead to price momentum.
“We’re not really price momentum investors,” he says, “but we’re kind of at the forefront of when we would like the companies to see price momentum.”
Finally, level four is about discipline—setting target prices, weighing upside potential against risk, and exiting positions when expectations are met or if fundamental concerns emerge. The team constantly refreshes the portfolio based on these principles, aiming to maintain favorable characteristics and limit emotional attachment.
“One of the hardest things for investors, whether you’re an individual investor or a professional investor, is to try to stay emotionally detached from the investment,” Dabora notes. “We’re not ever ashamed of having to declare either victory, because it’s just gotten so good, or defeat, because some adverse event happened and we need to move on.”
The ongoing discipline not only reduces bias but also supports portfolio evolution over time. By continually reassessing opportunities and risks through a structured lens, the strategy seeks to keep the portfolio focused and aligned with long-term objectives.
Structurally Small, Tactically Nimble
Advisors may wonder how a lean firm like Alpha Blue Capital maintains such a detailed approach without the scale of a large asset manager. According to Dabora, the firm’s size is a strength—not a constraint.
“We’re a family office entity, and certainly our AUM is small,” he says. But within the universe of about 20 small-mid ETFs, “we feel like we’re doing very well at the top of that category, which again, really presents a need for others. It’s a need that we have that we utilize already.”
Alpha Blue Capital leverages ETF Architect (a white-label platform under Alpha Architect) for operational support, including trading, compliance, and regulatory functions. That partnership allows Dabora’s team to remain focused on strategy and portfolio construction while ensuring institutional-grade infrastructure on the back end.
“All we’re involved with is managing, coming up with a strategy, and ultimately marketing,” he says.
That focus enhances agility. Without legacy fund lineups or internal distribution pressure, Alpha Blue Capital can make allocation decisions based solely on market conditions and portfolio fit. For advisors, that translates into a strategy built for responsiveness, not bureaucracy.
Institutional Process, Individual Access
Although ABCS is a relatively new ETF, the process behind it has been refined over decades. Dabora emphasizes that while the ETF’s public track record is still developing, the underlying strategy has deep roots in institutional investment management.
“We have a tremendous amount of institutional experience. We have a great process that’s done very well,” he says. “And the fact that we don’t have meaningful other AUM in the billions and trillions means that when we go to trade the stocks in this ETF, we can do it seamlessly.”
ABCS also aims to offer structural advantages beyond performance. The ETF wrapper supports daily liquidity, tax efficiency through in-kind redemptions, and transparency—all valuable features for advisors managing taxable client portfolios. As Dabora sees it, combining active selection with ETF efficiency challenges the traditional dichotomy between passive indexing and high-cost active mandates.
“We think that the future is in these active ETF wrappers,” he says. “Fees are just coming down, and the tax advantages of the ETF wrapper are great. I think you throw out the notion that passive is a better solution than active investing when you incorporate the ETF wrapper for individuals and other taxable and tax-exempt investors.”
Positioning ABCS Within Portfolios
ABCS is designed to serve multiple portfolio roles. Some advisors might use it as a core small-mid-cap allocation, while others may incorporate it alongside broader equity positions to increase exposure to undervalued, underrepresented names.
Alpha Blue Capital outlines several use cases for ABCS, including within multimanager mandates, portfolios with a large-cap bias, or global equity strategies. It may also appeal to private business owners or investors seeking tax-efficient small-mid-cap access. The objective goes beyond style box alignment to help enable accessing differentiated return potential from companies often ignored by large-cap-focused benchmarks.
“Our ultimate goal is to outperform the benchmark by 1–3% on an annualized basis,” Dabora says, referencing the Bloomberg 2500 Index that serves as ABCS’s primary benchmark. “We certainly feel like that’s an achievable goal.”
As the fund scales, the team expects to retain the same process rigor and flexibility. Screening, research, and risk assessment—across business, earnings, valuation, and liquidity risk—will remain central to portfolio construction. The team also leverages tools like Bloomberg and Morningstar Direct to monitor and manage characteristics in real time.
“We really think that with the efficiency of all the information, you don’t need 10 fundamental analysts to support the strategy,” Dabora adds. “We very much do our own work and make our own judgment.”
A Strategy Built for Market Gaps
With concentrated flows into mega-cap stocks and the rise of benchmark-based portfolios, many investors unintentionally neglect the small- and mid-cap space. ABCS seeks to provide a thoughtful, scalable solution to that problem—balancing active insight with ETF flexibility and tax-aware construction.
“We’re very excited about it,” Dabora says. “And we’re obviously hopeful that other investors are going to find us and see what we’re doing. That’s on us. Our biggest challenge is growing to a more critical AUM.”
As Alpha Blue Capital continues to build awareness and track record, the team remains focused on delivering a strategy that prioritizes substance over scale. For advisors looking to improve exposure to the less efficiently captured third of the market, ABCS may offer a compelling, adaptable option—one that aligns with both modern portfolio needs and long-standing investment discipline.
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Additional Resources
- Contact Alpha Blue Capital
- ABCS Prospectus
- ABCS SAI
- Alpha Blue Capital Active Equity Investment Process
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Definitions and Disclosures
Active Share: A measure of the percentage of stock holdings in a manager’s portfolio that differs from the benchmark index. Active share ranges from 0% (for a perfect index fund) to 100% (for a fund with no holdings in common with its benchmark). Higher active share indicates greater deviation from the benchmark.
Bloomberg 2500 Index: A broad market index that represents approximately the bottom 2,500 stocks in the U.S. equity market by market capitalization, encompassing both small-cap and mid-cap securities. The index serves as a benchmark for small and mid-cap investment strategies.
CRSP Index: Indexes maintained by the Center for Research in Security Prices at the University of Chicago. CRSP U.S. Total Market Index includes nearly 4,000 constituents across mega, large, small, and micro capitalizations, representing nearly 100% of the U.S. investable equity market. CRSP separates the market into distinct cap-based segments including small-cap and mid-cap indexes.
Price to Book (P/B) Ratio: A valuation metric calculated by dividing a company’s current stock price by its book value per share. Book value represents the net worth of the company as recorded on its balance sheet. The P/B ratio indicates what investors are willing to pay for each dollar of net assets.
Price to Earnings (P/E) Ratio: A valuation metric calculated by dividing a company’s current stock price by its earnings per share (EPS). The P/E ratio indicates how much investors are willing to pay for each dollar of earnings and is used to compare valuations across companies and time periods.
Russell 2000 ETF (IWM): An exchange-traded fund that tracks the Russell 2000 Index, which measures the performance of approximately 2,000 small-cap U.S. companies. The Russell 2000 represents the smallest 2,000 companies in the Russell 3000 Index and is widely used as a benchmark for small-cap equity performance.
The fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. The statutory prospectus and prospectus contain this and other important information about the investment company, and it may be obtained by calling 215-882-9983 or visiting https://alphabluecapitalabcs.com. Read it carefully before investing.
Investments involve risk. Principal loss is possible. The Fund is actively-managed and is subject to the risk that the strategy may not produce the intended results. The Fund is new and has a limited operating history to evaluate.
Growth-Style Investing Risk. Stocks of companies the Sub-Adviser believes are fast-growing may trade at a higher multiple of current earnings than other stocks. If the Sub-Adviser’s assessment of a company’s prospects for earnings growth, or how other investors will value the company’s earnings growth, is incorrect, the price of the stock may fall or may never reach the value the Sub-Adviser has placed on it. Value-Style Investing Risk. Value stocks can perform differently from the market as a whole and from other types of stocks. Value stocks may be purchased based upon the Sub-Adviser’s belief that the stock may be out of favor. Value investing seeks to identify stocks that have depressed valuations, based upon a number of factors which are thought to be temporary in nature, and to sell them at superior profits should their prices rise in response to resolution of the issues which caused the valuation of the stock to be depressed. Foreign Securities Risk. Investments in non-U.S. securities involve risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. Non-Diversification Risk. Because the Fund is non-diversified, it may be more sensitive to economic, business, political or other changes affecting individual issuers or investments than a diversified fund, which may result in greater fluctuation in the value of the Fund’s Shares and greater risk of loss. Business Development Company (BDC) Risk. BDCs generally invest in less mature U.S. private companies or thinly traded U.S. public companies which involve greater risk than well-established publicly traded companies. Real Estate Investment Risk. The Fund’s investments in real estate companies and companies related to the real estate industry subject the Fund to risks associated with the direct ownership of real estate securities. New Fund Risk. The Fund is a recently organized management investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. There can be no assurance that the Fund will grow to or maintain an economically viable size. Small-Capitalization Companies Risk. Investing in securities of small-capitalization companies involves greater risk than customarily is associated with investing in larger, more established companies.
ETFs may trade at a premium or discount to their net asset value. Redemptions are limited and often brokerage commissions are charged on each trade which may reduce returns.
The fund may invest in medium-capitalization companies which may be subject to greater risks than large company stocks due to limited resources and inventory as well as more sensitivity to adverse market conditions.
The Fund is distributed by Quasar Distributors, LLC. The Fund investment advisor is Empowered Funds, LLC, which is doing business as EA Advisers. The Fund’s sub-advisor is Alpha Blue Capital Management LP.
