I hasten to point out that RPV, the Guggenheim pure value play, got absolutely crushed in 2008. However, it roared back after falling so hard.
RPV’s whipsaw performance is consistent with its extremely high beta to the S&P 500 over the past five years—1.37, to be precise.
By contrast, IVE, the plain-vanilla value play on the S&P 500, has a beta of just 1.06 by comparison. (I came up with that figure based on a regression on IVV using daily Bloomberg net asset value total return data (NAV TR)).
Still, RPV (pure value) and RPG (pure growth) have beaten both the broad market and their plain-vanilla style peers mentioned above since the market peak in October 2007 and since their inceptions in 2006.
RPV and RPG may be too aggressive for many investors as a long-term allocation. But their bold performance profile would serve well as a tactical play or as an overlay for a value or growth tilt.
The plain-vanilla style funds—IWD and IWF for the Russell 1000 and IVE and IVW for the S&P 500—are too tame for tactical or overlay use. They work better as a long-term allocation that takes modest risks relative to the market.
However, I don’t find the performance and construction of these funds compelling, at least on their own. Perhaps a combination of style and pure style would fit the bill, such as IVE and RPV for value and IVW and RPG for growth.
A combo approach would allow investors to dial in how much market risk they can bear while maximizing upside.
Lastly, I found no alpha—no risk-adjusted outperformance—for any of these funds. These are U.S. large-cap equities after all.
At the time this article was written, the author held no positions in the securities mentioned. Contact Paul Britt at [email protected].