Dread it, run from it – the value argument still arrives, and it came back in a big way in October, according to ETF flows data from YCharts. Last month’s mini-market rally topped off a July to September stretch in which growth subfactors beat the market while value subfactors struggled. Markets have been buoyed by stubbornly resilient economic indicators despite the Fed’s best efforts to slow inflation.
Despite that, the argument for small cap value ETFs jumps out in the data, with small value ETFs bringing in $912 million in one-month flows, nearly 1/3 of the category’s YTD Flows of $2.8 billion, according to YCharts. What’s more, small cap value ETFs returned 4.6% over one month compared to returns of -9.7% YTD.
Granted, much of that is, as ever, thanks to the power of Vanguard, with the Vanguard Small-Cap Value ETF (VBR) bringing in $425 million over one month compared to -$66 million YTD, bouncing its own returns from -8.9% YTD to 8.5% over one month. VBR’s even added another $143 million over the last five days, according to VettaFi, charging just seven basis points.
But there are other names in small cap value world picking up steam, as well, outside of Vanguard’s orbit. Just behind it is the actively managed Avantis U.S. Small Cap Value ETF (AVUV) which saw $335 million in one-month flows, a significant part of its overall $2 billion YTD. AVUV has also turned its performance around, seeing a 10.7% return over one month compared to YTD returns of -2.1%.
AVUV uses fundamental screens like outstanding shares, cash flow, and price-to-book value as it looks to provide investors the benefits of indexing, like low turnover and diversification, with the opportunity to add value via active management. AVUV charges 25 basis points to investors.
Invesco lays claim to multiple small cap value ETFs buoyed by October’s value trend, with four of the top five highest one-month returns in the category according to YCharts, and none returning less than 10% over one month.
Investors looking to the Invesco suite should consider the Invesco S&P SmallCap 600 Revenue ETF (RWJ), which has returned 10.4% over the month, taking in $49 million over that time compared to its $240 million in YTD flows. RWJ sets itself apart by weighting stocks in the S&P SmallCap 600 based on top-line revenue rather than market cap, appealing to those investors who want to privilege low price-to-sales multiples in how they analyze firms. RWJ charges 39 basis points.
While it remains to be seen whether this mini-market rally may reset expectations among growth stock investors, with the biggest tech firms almost standing in for the market as a whole, value options are in play, and investors should take notice.
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