Best And Worst Q3 2020: Mid Cap Value ETFs And Mutual Funds

Best And Worst Q3 2020: Mid Cap Value ETFs And Mutual Funds

The Mid Cap Value style ranks seventh out of the 12 fund styles as detailed in our Q3’20 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Mid Cap Value style ranked sixth. It gets our Neutral rating, which is based on an aggregation of ratings of 12 ETFs and 140 mutual funds in the Mid Cap Value style. See a recap of our Q2’20 Style Ratings here.

Figures 1 and 2 show the best and worst rated ETFs and mutual funds in the style. Not all Mid Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 31 to 688). This variation creates drastically different investment implications and, therefore, ratings.

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

Figure 1: ETFs with the Best and Worst Ratings

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

Sources: New Constructs, LLC and company filings

iShares Focused Value Factor ETF (FOVL) is excluded from Figure 1 because its total net assets are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best and 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

Fidelity Mid Cap Value K6 Fund (FCMVX) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums.

Alpha Architect US Quantitative Value ETF (QVAL) is the top-rated Mid Cap Value ETF and Fidelity Advisor Mid Cap Value Fund (FIDFX) is the top-rated Mid Cap Value mutual fund. Both earn a Very Attractive rating.

First Trust Dorsey Wright Momentum & Value ETF (DVLU) is the worst rated Mid Cap Value ETF and Transamerica Small/Mid Cap Value (IIVAX) is the worst rated Mid Cap Value mutual fund. DVLU earns a Neutral rating and IIVAX earns a Very Unattractive 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.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. We perform this diligence with scale. 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 Mid 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 July 24, 2020.

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

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