On Thursday, BlackRock launched the newest member of the iShares Focused Value suite of ETFs; the iShares International Developed Small Cap Value Factor ETF (ISVL). Just weeks before November’s vaccine announcements kickstarted the ongoing rally in value stocks, iShares launched the iShares US Small Cap Value Factor ETF (SVAL). In the four months since then, SVAL’s AUM has crossed $100 million.
Why now?
After years of underperformance, value stocks have rallied in both U.S. and international markets since the Pfizer vaccine’s announcement on 11/9/2020 to outperform their respective broad markets.1
Investors have been increasingly turning to factor investing in international markets. iShares saw record flows of ~$1.7B into its international single factor suite in 2020, a 70% increase from 2019.2
Small cap companies’ nimble nature may position them to quickly evolve to take advantage of structural economic changes. Simultaneously, value stocks have the potential to outperform growth stocks during economic recoveries, with value-oriented industries tapping into pent-up demand created by the pandemic.
Why should investors consider ISVL?
There has been gain exposure to international small cap companies with prominent value characteristics, harnessing the historically rewarded value and size factors.
Additionally, there’s a more robust measurement of value. ISVL uses multiple metrics to robustly capture value through a different lens.
With an index-based approach, the fund can address the challenges of small cap value investing by tracking the FTSE Developed ex-US ex Korea Small Cap Focused Value Index.
Finally, the ETF benefits offer focused exposure to international small cap value stocks through a transparent and cost-efficient ETF, priced at 30bps.3
Bob Hum, US Head of Factor ETFs, says, “ISVL was launched to give investors more choice as they look to build efficient portfolios. While we have various small cap value ETFs available in the US, ISVL is the first iShares ETF to specifically target small cap value exposure in international markets. We believe ISVL is a critical extension of our Factor ETF lineup as it gives investors the ability to invest in historically rewarded Factors beyond the US and can meet the growing demand for pro-cyclical exposure that can potentially benefit from a reopening of the economy post-COVID 19.”
1 Source: Morningstar as of 3/22/21. Compares the total return from 11/9/2020-3/22/2021 of the S&P 500 Index (12.98%) to the MSCI USA Enhanced Value Index (34.83%), and MSCI World ex USA Index (17.08%) to the MSCI World ex USA Enhanced Value Index (30.24%).
2 Source: iShares Global Business Intelligence
3 The Fund’s gross expense ratio is 0.40%. BlackRock Fund Advisors, the investment adviser to the Fund and an affiliate of BlackRock Investments, LLC, has contractually agreed to waive a portion of its management fees through March 31, 2023. Please see the Fund’s prospectus for additional details.
For more information, visit www.blackrock.com.
