A recent look at the ETFs with more than $1 billion if inflows this year revealed that many investors are still chasing momentum instead of looking for value. For example, the iShares MSCI USA Momentum Factor ETF (MTUM) has taken in over $2.3 billion (which ranks eighth out of the 21 equity ETFs with $1 billion or more of net inflows in 2018). Investors are betting that momentum strategies will keep working for the foreseeable future.
By contrast, this value ETF has taken in just one-tenth of MTUM’s inflows, as investors think value investing doesn’t work anymore. However, as we’ve written before, value investing still works, it’s just become much harder. Many value funds underperform because they attempt to execute value investing strategies that rely on overly simplistic metrics, like price to earnings or price to book, that don’t measure value well.
Leveraging our Robo-Analyst technology, which analyzes the holdings of all 7,908 ETFs and mutual funds under coverage, we found this ETF with high quality holdings that should appeal to sophisticated value investors.