Infrastructure Capital Advisors
Income from Real Assets
SCAP: Unlocking Value in the Small-Cap Income Opportunity
Finding small-cap companies that tick the boxes of being both comparatively undervalued to their peers and may unlock current income opportunities is a persistent challenge. The universe of small-cap companies is vast and sorting through all of the potential entrants can overwhelm analysts.
The Infrastructure Capital Small Cap Income ETF (SCAP) uses an actively managed top-down macro approach that matches fundamental analysis with income-enhancing strategies in order to create both capital appreciation and current yield for investors.
Let’s take a look at SCAP and see how they put this all together.
The Small-Cap Income Advantage
SCAP launched on December 11th, 2023. Since launch, it has been focused on small-cap value investing. Per the prospectus, the fund invests at least 80% of its assets in small-cap companies, via traditional stock and preferred shares, that match its intended target profile. The fund also uses options to enhance yield and to provide additional cross-asset small-cap value exposure. The fund's unified management fee is 0.80%, while the 1.96% total expense ratio reflects the active management approach and income enhancement strategies employed, including interest expense on the cost of borrowing.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call 800-617-0004 for performance data current to the most recent month end.
The fund has a current 30-day SEC yield of 6.03% (as of May 31, 2025)1. This focus on current income in addition to screening for potentially undervalued small-cap companies makes SCAP’s strategy unique. This yield generation in the small-cap space is really interesting. This kind of income-producing strategy has traditionally been limited to the large-cap universe.
People
Jay Hatfield is the portfolio manager for SCAP and brings nearly three decades of experience managing credit and infrastructure portfolios. Andrew Meleney contributes specialized research capabilities as Director of Research. Samuel Caffrey-Agoglia provides risk management oversight as Chief Risk Officer. The team applies a robust and disciplined, top-down approach, keeping global macro factors in mind while following their overall investment thesis.
Portfolio Construction and Sector Focus
SCAP's current portfolio emphasizes the team’s expertise in sectors with hard assets and historically stable cash flows. The fund currently maintains large allocations to financials (38.47%), REITs (31.34%), industrials (9.92%) and investment funds (9.74%) sectors.2 This sector concentration is intentional. These have historically provided both value opportunities and income generation potential within the small-cap universe. However, the portfolio still maintains diversification across 16 different sectors. This meshes with their desire to continue to value broader portfolio capital appreciation.
The portfolio also combines 72.57% common stock with 27.43% preferred shares2, this split attempts to provide a consistent stream of current income while maintaining the upside exposure to the overall market.
Active Management in Practice
SCAP’s investment process starts with the team screening the entire small cap universe for companies that show positive earnings and free cash flow.
Once this initial screen is done, the remaining pool is put through a yield analysis that includes current dividend schedule, payout ratio analysis and potential dividend growth.
The team runs additional modelling screens on prospective companies to establish price targets that fit with their desired income and valuation profiles. These include discounted cash flow (DCF) and other value frameworks.
This active selection process is where SCAP has the ability to avoid value traps. Traditional passive products simply follow a methodology which can inadvertently select companies that do not suit the overall profile but may have anomalous short-term results that qualify them.
SCAP also enhances returns through strategic options writing. Targeting a leverage of 10-30%, the fund seeks to generate additional income while maintaining upside participation in its underlying holdings.
Performance and Positioning
SCAP's performance demonstrates the potential effectiveness of combining active small-cap selection with an income enhancement overlay. The fund's historical outperformance versus the Bloomberg US 2000 Value Total Return Index, while still generating current income, backs up the initial thesis that specialized, actively managed approaches could provide superior performance in today's market environment.
Investment Considerations
While SCAP offers a specific small-cap income value opportunity, investors should always consider the inherent risks of small-cap investing. There is the potential for high volatility along with concentration risk from the fund's current sector allocations.
Source:
1: As of 5/31/2025 – Fund Details – InfraCap - https://www.infracapfund.com/SCAP
2: As of 6/6/2025 – Fund Holdings – InfraCap - https://www.infracapfund.com/download-holdings-usbanks.php?fund=SCAP
3: The price-to-earnings (P/E) ratio measures a company's current share price relative to its per-share earnings. EV/EBITDA is a financial ratio that compares a company's enterprise value (EV) to its earnings before interest, taxes, depreciation, and amortization (EBITDA). It's a popular valuation tool that investors use to compare companies and make investment decisions. The P/FFO or Price to Funds From Operations ratio is a financial measure that is used in the valuation of a real estate investment trust (REIT). The price is the current market price of each REIT stock, and FFO is the per share monetary value an REIT generates from its business operations.
4: Bloomberg US 2000 Value Total Return Index provides exposure to companies with superior value factor scores based on their earnings yield, valuation, dividend yield, and growth.
About Us
Infrastructure Capital Advisors, LLC
The Income Specialists
Infrastructure Capital Advisors, LLC (ICA) is a registered investment advisor that manages exchange traded funds (ETFs) and a series of hedge funds. The firm was formed in 2012 and is based in New York City.
The firm seeks current income as its primary objective in most of its investing activities. Consequently, the firm focuses generally on companies that generate and distribute substantial streams of free cashflow.
This approach is based on the belief that tangible assets that produce free cashflow have intrinsic values that are unlikely to deteriorate over time.
Free cash flow indicates the amount of cash generated each year that is free and clear of all internal or external obligations.
Investment Team Leader
Jay D. Hatfield | Founder, CEO, and Portfolio Manager
Mr. Hatfield has almost three decades of experience in the securities and investment industries. At ICA, he is the portfolio manager of InfraCap MLP ETF (NYSE: AMZA), InfraCap REIT Preferred ETF (NYSE: PFFR), Virtus InfraCap U.S. Preferred Stock ETF (NYSE: PFFA), and a series of hedge funds. He leads the investment team and directs the company’s business development.
During his career, Mr. Hatfield has gained a broad perspective on the U.S. financial markets with years as an investment banker, a research director and portfolio manager, and as a co-founder of a NYSE-listed company. A focus on companies that own real or hard assets, like energy infrastructure and real estate, runs through Mr. Hatfield’s career.
Prior to forming ICA, he partnered with senior energy industry executives to acquire several midstream MLPs. These companies were merged to form a company now known as NGL Energy Partners, LP (NYSE: NGL). NGL was an IPO in May 2011. He is a general partner of the publicly-traded company.
In the years prior to forming NGL, Mr. Hatfield was a portfolio manager at SAC Capital (now Point72 Asset Management), running a portfolio focused on income securities. He joined SAC from Zimmer Lucas Partners, a hedge fund focused on energy and utility sectors, where he was head of research. Earlier in his career, he was head of an investment banking unit at CIBC/Oppenheimer and a Principal in an investment banking unit at Morgan Stanley & Co. He began his career as a CPA at Ernst & Young. He holds an MBA from the Wharton School at the University of Pennsylvania and a BS from the University of California at Davis.
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Fund Overview
We believe that our proven, income-focused strategy can be overlayed into the common equity asset class which possesses: a robust investor base, a large investable universe, and, complementary yield-enhancement opportunities.
Liquidity
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Small Cap equities can provide investors total return and active managers opportunities to manage risk.
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By investing in a diversified portfolio of Small Cap securities, we seek to monitor concentrations to specific stocks and positions sizes.
Large Investable Universe
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Equity investments can be made in companies across all sectors allowing the Fund to fully capture diversification benefits
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A large investable universe (~2,000 companies) presents a substantial opportunity set for timely and opportunistic investments
Options / Preferreds / Equity Linked-Notes
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The Fund will utilize options strategies to both hedge the portfolio and capture additional yield
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A deep understanding of preferred stocks presents opportunities for significant investments in low-beta, high-dividend preferred stocks creating a unique investment vehicle
Volatility differences are measured as differences between 2-yr annualized volatilities. Beta (β) is a measure of the volatility—or systematic risk—of a security or portfolio compared to the market as a whole (usually the S&P 500). Stocks with betas higher than 1.0 can be interpreted as more volatile than the S&P 500. Data as of August 31, 2023. All data taken from Bloomberg. Treasury (LUATTRUU Index), Municipal (LMBITR Index), Corporate Bond (LUACTRUU Index), Preferreds (SPTREFTR Index, PFF Equity), High Yield (LF98TRUU Index). Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. *See www.infracapfunds.com for more disclosure on indices. Performance data quoted represents past results. Past performance is no guarantee of future results. The distributions among asset classes can vary significantly with respect to the components that make up the distributions. It should be noted that Treasury Assets, Municipal Assets, Corporate Bonds, Preferred Stocks, and High Yield Assets each contains materially different characteristics including risks, expenses, and outcomes not captured by this chart. Key risks of these yield alternative assets include: credit, liquidity and interest rate risks;
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Fund Summary
Returns for periods of less than one year are cumulative total returns. The fund commenced operations on December 11th, 2023, therefore the performance in the period above reflects only a partial time period. Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Please call 800-617-0004 for performance data current to the most recent month end. Shares shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Total Returns are calculated using the daily 4:00pm EST net asset value (NAV). Market price returns reflect the midpoint of the bid/ask spread as of the close of trading on the exchange where Fund shares are listed. Market price returns do not represent the returns you would receive if you traded shares at other times.
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SCAP ETF DISCLOSURE
About Us:
Infrastructure Capital Advisors, LLC (ICA) is an SEC-registered investment advisor that manages exchange traded funds (ETFs) and a series of hedge funds. The firm was formed in 2012 and is based in New York City. ICA seeks current income opportunities as a primary objective in most, but not all, of ICA's investing activities.
DISCLOSURE
The information contained herein represents our subjective belief and opinions and should not be construed as investment, tax, legal, or financial advice. This information does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell, or otherwise transact in any investment including any products or services or an invitation, offer or solicitation to engage in any investment activity. This article is not an offer to sell, or solicitation of an offer to buy any investment product or services offered by Infrastructure Capital Advisors, LLC, (“ICA”) or its affiliates. ICA, will only conduct such solicitation of an offer to buy any investment product or service offered by ICA, if at all, by (1) purported definitive documentation (which will include disclosures relating to investment objective, policies, risk factors, fees, tax implications and relevant qualifications), (2) to qualified participants, if applicable, and (3) only in those jurisdictions where permitted by law. Infrastructure Capital Advisors, LLC nor any of its affiliates accepts any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. This data includes information based on data and calculations sourced from Bloomberg and third-party sources. We believe that the data is reliable, we have not sought, nor have we received, permission from any third-party to include their information in this article. The preferred market place information and comparative active and passive management information is provided for informational purposes only, actual funds and indices may have different characteristics and risks which are not presented. Many of the assumptions in this illustration reflect our subjective belief and is subject to change without notice. Certain information contained in this document constitutes “forward-looking statements,” which can be identified by the use of forward-looking terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” or the negatives thereof or other variations thereon or other comparable terminology. Due to various risks and uncertainties, actual events or results may differ materially from those reflected or contemplated in such forward-looking statements. Additionally, any projections, market outlooks and estimates included herein are based upon certain assumptions, including but not limited to the prior experience of ICA and other factors it deems relevant such as current and expected market conditions These materials are provided for informational purposes only.
Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus with this and other information about the InfraCap Small Cap Income ETF or InfraCap Equity Income Fund ETF, please visit each respective fund page here – www.infraCapfund.com/scap or www.InfraCapfund.com/icap. Please read the prospectus carefully before investing. For more information about the Funds, Funds’ strategies or InfraCap, please reach out to Craig Starr at 212-763-8336 (Craig.Starr@icmllc.com).
A word about SCAP risk: Investing involves risk, including possible loss of principal. An investment in the Fund may be subject to risks which include, among others, investing in equities securities, dividend paying securities, utilities, small-, mid- and large-capitalization companies, real estate investment trusts, master limited partnerships, foreign investments and emerging, debt securities, depositary receipts, market events, operational, high portfolio turnover, trading issues, active management, fund shares trading, premium/discount risk and liquidity of fund shares, which may make these investments volatile in price. Foreign investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, and changes in currency exchange rates which may negatively impact the Fund’s returns. Small and Medium-capitalization companies, foreign investments and high yielding equity and debt securities may be subject to elevated risks. The Fund is a recently organized investment company with no operating history. Please see prospectus for discussion of risks. Diversification cannot assure a profit or protect against loss in a down market. Dividends are not guaranteed and may fluctuate. The fund does not guarantee current or future income. SCAP is distributed by Quasar Distributors, LLC.
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