Value’s comeback has arrived — maybe

Comparing two value ETFs underscores peril in evaluating records based on past performance alone

Value’s comeback has arrived — maybe

Investors in U.S. equity ETFs have had plenty of reason to celebrate as broadly diversified ETFs surged more than 30%, whether their underlying index was the S&P 500 or the Russell 1000. But those anticipating the resurgence of value still have no clear answers — or at least they should realize, if they cared to compare two different value ETFs’ performance records.

The ambiguity, explains CFRA Director of ETF Research Todd Rosenbluth, stems from a difference in the underlying growth and value components of the S&P 500 and Russell 1000 indexes. “The S&P 500 and the Russell 1000 Indexes are both split into growth and value smart-beta ETF slices, but what is inside these benchmarks, and therefore the ETFs that track them, are distinct,” he said in a piece published on

To illustrate, he began by noting that the SPDR S&P 500 Index ETF (SPY), achieved a 31.2% total return in 2019, while the iShares Russell 1000 ETF (IWB) managed a similar 31.1%. The funds have similar concentrations of assets in their top 10 holdings (23% of assets for SPY vs 21% for IWB), and both are market-cap weighted with Apple, Microsoft, and having significant weightings.

The benchmark differences become more prominent when considering the growth and value ETFs that correspond to each index, specifically in terms of their performance. “SPDR S&P 500 Value (SPYV) outperformed SPDR S&P 500 Growth (SPYG) by approximately 80 basis points (31.7% vs. 30.9%) in 2019,” Rosenbluth said. “Though the both charge miniscule expense ratios of just 0.04%, SPYV lagged SPYG the last five calendar years.”

He cited a 2020 outlook from CFRA Chief Investment Strategist Sam Stovall, which forecast a likely continuation in the relative outperformance of value over growth based mostly on the relative “expensiveness” of the growth index.

“But before value fans get too excited it should be noted that Stovall is using the S&P 500 for his analysis,” Rosenbluth said. “iShares Russell 1000 Value ETF (IWD) rose just 26.1% in 2019, lagging the broader index and the 35.9% for the iShares Russell 1000 Growth (IWF).”

What’s behind the disparity between the two indexes when it comes to the relative performances of their respective growth and value slices? Rosenbluth attributed it to the differences in their underlying components. Both are reconstituted annually, with the S&P 500 being rebalanced in late December and the Russell 1000 in May.

“Value criteria for the S&P 500 include book value, earnings and sales to price, while the Russell Index uses just book to price,” he said. Notably, Apple was part of SPYV just a few weeks ago, but has since been re-classified into SPYG; with that move, both SPYG and IWF now have holdings of Apple, Microsoft, and Amazon.

“Because stocks are not permanently part of a growth or a value ETF, CFRA thinks investors need to focus more on what’s inside rather than relying solely on past performance,” Rosenbluth said.


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