All Cap Value Style 2Q17: Best and Worst

The All Cap Value style ranks fifth out of the twelve fund styles as detailed in our 2Q17 Style Ratings for ETFs and Mutual Funds report. Last quarter, the All Cap Value style ranked fourth. It gets our Neutral rating, which is based on an aggregation of ratings of 11 ETFs and 300 mutual funds in the All Cap Value style as of April 20, 2017. See a recap of our 1Q17 Style Ratings here.

Figure 1 ranks from best to worst the nine all-cap value ETFs that meet our liquidity standards and Figure 2 shows the five best and worst rated all-cap value mutual funds. Not all All Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 21 to 1364). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the All Cap Value style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our robo-analyst technology empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings. We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

WeatherStorm Forensic Accounting Long-Short ETF (FLAG) and Deep Value ETF (DVP) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

First Trust Large Cap Value AlphaDEX Fund (FTA) is the top-rated All Cap Value ETF and Fidelity Large Cap Value Enhanced Index Fund (FLVEX) is the top-rated All Cap Value mutual fund. Both earn a Very Attractive rating.

iShares Russell 1000 Value ETF (IWD) is the worst rated All Cap Value ETF and RiverPark Focused Value Fund (RFVFX) is the worst rated All Cap Value mutual fund. IWD earns a Neutral rating and RFVFX earns a Very Dangerous rating.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our robo-analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all All Cap Value ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Funds

Sources: New Constructs, LLC and company filings

This article originally published on April 24, 2017.

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

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