There’s been no place to hide for US equity beta strategies this year, but the distribution of pain varies widely from a risk-factor perspective, based on a set of representative exchange-traded funds. The factor funds with the softest haircuts year to date: large-cap growth, momentum and low-volatility. By contrast, the various flavors of small-cap, along with mid-cap value, have suffered the most.
For the moment, iShares S&P 500 Growth (NYSE:IVW) has fallen the least in 2020 through yesterday’s close (Apr. 6) for the main cuts of US equity factors. The fund is down 11.6% year to date. A close second: iShares Edge MSCI USA Momentum Factor (MTUM), which has shed a relatively light 13.4% so far this year. In third place: iShares Edge MSCI Minimum Volatility USA (NYSE:USMV), which is nursing a 14.7% year-to-date slide. In all three cases, the losses are milder vs. the benchmark: SPDR S&P 500 (NYSE:SPY), which is down 17.2% this year.
By contrast, the deepest loss for our set of factor funds: iShares S&P Small-Cap 600 Value (NYSE:IJS), which has tumbled a steep 38.9% year to date. The small-cap growth (NASDAQ:IJT) and small-cap core (NYSE:IJR) funds are also posting relatively steep losses. Note, too, that mid-cap value is the second-worst performer this year: iShares S&P Mid-Cap 400 Value (NYSE:IJJ) has declined a hefty 35.6% in 2020 through Monday’s close.
The deeper losses in small-cap and value funds this year isn’t surprising. A long line of research advises that small-cap and value factors harbor bigger risks. In the long run, those risks have shown a tendency to deliver bigger