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Voracious for Value ETFs

May 13, 2016 8:49 am
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One of the more noticeable theme among investment factors this year is the resurgence of the widely followed value factor. During the halcyon days of the current bull market, value was not the place to be as investors favored growth and momentum fare.


That script has been flipped in 2016. Flows data for exchange traded funds based on the value factor confirm as much. Investors should consider boosting exposure to the value factor now before it gets too hot and they chase value when it is no longer offering, well, value.


“Investors have picked up on the recent trend and have actively been shifting assets between the two fundamental strategies since the start of the year. Growth ETFs have now seen $5.9bn of outflows ytd as investors have withdrawn funds out of the strategy for every month so far this year,” said Markit in a recent note.


Conversely, the iShares S&P 500 Value ETF (NYSE: IVE) and the Vanguard Value ETF (NYSE: VTV) have added about $2 billion, combined, in new assets this year. IVE is up 3.7 percent year-to-date, better than double the returns offered by the S&P 500, while VTV is outpacing the benchmark U.S. equity index by 110 basis points.


Another value ETF that must be considered is the Guggenheim Invest S&P 500 Pure Value ETF (NYSE: RPV). Part of the reason RPV has been in the spotlight this year is the seven-year anniversary of the current bull market. Over that time, RPV has notched a legendary performance, turning $10,000 invested on March 10, 2009, into more than $62,000 as of March 10, 2016.


RPV is beating VTV and handily outpacing the S&P 500 this year. The rub with many value ETFs, including this trio, is substantial allocations to either financial services and energy stocks or both. Most value ETFs feature those groups as their top two sector weights. In the case of RPV, the Guggenheim value offering, financials are that ETF's largest sector weight at 26.9 percent.


Utilities and consumer discretionary names combine for over 29 percent of RPV's weight before getting to the 9.6 percent the ETF devotes to energy stocks.


“Value ETFs have seen the opposite trend as the asset class recovered from the outflows seen in January with four straight months of consecutive inflows. Net, net, investors have added $2bn of exposure to value investing,” adds Markit.

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