Charting Divergence: Value ETFs Crushing Growth

May 13, 2014

 

Value Crushing Growth

A performance difference between so-called growth and value stocks began to emerge in March and has expanded into May with the Guggenheim S&P 500 Pure Value ETF (RPV | A-66) now outperforming the Guggenheim S&P 500 Pure Growth ETF (RPG | A-58) by nearly 7.5 percent.

Interestingly, the performance difference is much more muted between the two most popular growth and value funds—a hint to material methodology differences. The performance of the iShares Russell 1000 Value ETF (IWD | A-86) and the iShares Russell 1000 Growth ETF (IWF | A-89) are separated by only 4 basis points, or 0.04 percent, over the past year—a far cry from the 750 basis points, or 7.50 percent separating RPV from RPG.

The reason? RPG and RPV follow "pure" style indexes, which means their holdings don't overlap at all—each company can be only growth or value, never both. In contrast, much of IWD's portfolio overlaps with IWF's resulting portfolios that are far more similar than one might imagine.

 

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