Welcome to the new my.morningstar.com! Learn more about the changes and how our new features help your investing success.

Three Shades of Value (Part 1)

The different methodologies used by value funds can affect their style tilt and performance

Value investing has long been associated with excess rates of return. Generally speaking, a value-oriented approach involves buying stocks that are cheap according to some measure of intrinsic value in hopes that they will one day revert to their fair value. But that day may be a long time in coming--if it ever comes at all. Patience is a requirement, and the past decade has tested the strongest advocates of value investing. For the 10-year period through December 2016, the Russell 1000 Value Index underperformed the broader Russell 1000 Index by almost 1.5 percentage points annually. Adding insult to injury, it was also more volatile and suffered deeper drawdowns during the depths of the global financial crisis.

By measure of the same Russell indexes, value continued to have a difficult time as it emerged from its postcrisis nadir. From March 2009 through December 2016, the Russell 1000 Index again outpaced the Russell 1000 Value Index, in this instance by 16 basis points annually. That's not a huge difference, but it's notable considering value strategies are associated with higher expected returns. However, drawing the conclusion that all value strategies underperformed during this period would be shortsighted. Not all value strategies are created equal.

Large-cap value funds are plentiful in the United States, and many of them are actively managed. Here, I'll look more closely at a select subset of funds within the large-value Morningstar Category. My sample is dominated by index-tracking ETFs with at least 10-years of returns. I've also included DFA U.S. Large Cap Value (DFLVX, listed in the U.S.) as it employs a systematic, rules-based strategy. All of these were investable as of this writing.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Member.

Register For Free

About Author

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure

Audience Confirmation


By clicking "accept" I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See "Cookie Consent" for more detail.

  • Other Morningstar Websites
© Copyright 2021 Morningstar, Inc. All Rights Reserved.      Terms of Useund      Privacy Policy.
© Copyright 2021 Morningstar Asia Ltd. All rights reserved.

Terms of Use        Privacy Policy        Cookies