Investors are turning up the defense as market uncertainty ahead is causing more exchange-traded fund (ETF) inflows into value-oriented funds as opposed to their growth-focused counterparts during the month of September, according to a MarketWatch article.
“Investors rotated toward more defensive holdings, and continued to try to find values in sectors of the market that have been left out of 2020’s big stock-market rally, according to exchange-traded fund flows data covering the month of September,” the article said.
“Conversely, stock fund investors in September tried, tentatively, to leave the perceived safety of big growth strategies, which have dominated this year,” the article added. “The iShares Edge MSCI USA Value Factor ETF (VLUE) and Vanguard Value ETF (VTV) picked up big flows, and one out-of-favor sector, industrials, also had a strong month.
Despite the shift, it’s still too early to tell whether investors are truly rotating out of growth and into value, according to Todd Rosenbluth, CFRA’s head of mutual fund and ETF research.
“It’s hard to call this the start of a real rotation, Rosenbluth said in an interview, but it’s more than a ‘headfake. Investors are dipping their toes in cautiously,’ he added,” the article explained.
Finding Value in Emerging Markets
While the coronavirus pandemic put on the heavy gloves against EM assets, there are still value plays to be had, but it can all be done in one fund—the FlexShares Morningstar Emerging Markets Factor Tilt Index Fund (TLTE).
TLTE seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Morningstar® Emerging Markets Factor Tilt IndexSM. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to size and value factors relative to the Morningstar Emerging Markets Index, a float-adjusted market-capitalization weighted index of companies incorporated in emerging-market countries.
The fund will invest at least 80% of its total assets in the securities of the index and in ADRs and GDRs based on the securities in the index. At the heart of the fund lies its strategy that uses a factor tilt process.
After categorizing companies based on market cap, TLTE assigns a value score based on price/book ratio, price/earnings ratio, price/cash flow ratio, price/sales ratio, and dividend yield. Selected securities are then divided by thirds into the following categories: value, core, and growth—all applied to the market cap categories—large cap, mid cap and small cap allocations.
For more market trends, visit ETF Trends.