Note to Self: Keep Looking Under the Hood

Hi All,

Emma here again, filling in for Rob. One fun thing about moonlighting this week has been getting a more hands on feel for how Rob decomposes markets and challenging my own biases. I was perusing a table of important indicators and the highlighted row jumped out at me. AOR is a core growth allocation ETF. But…hmm… 6.46% YTD? Doesn’t seem very “growthy” now does it?

This sent me into a bit of a tailspin, but then I remembered AOR is a fund-of-funds, and also a designated a “core” allocation (with at least two fixed income ETFs piled in). So yes, we wouldn’t necessarily expect this to be the “growthiest” ETF out there. But to a lesser trained eye, I think this is an easy mistake to make and one of the challenges of ETFs. Aligning expectations across investing styles, ETF providers, and ETF investors is a real challenge. This was my daily (hourly?) reminder to never take an ETF name at face value.

Anyway, something interesting I thought I’d highlight is the differential in Growth vs. Value in US markets vs. International. A lot of my background is in factor investing, so I’m always curious to see how growth and value factors are performing in the US vs. internationally. In particular, because the ECB cut rates earlier in the month, I’ve been curious to see if this might catalyze a rotation out of growth and into value abroad. Look at the delta in growth/value performance in the US versus international markets. Another reminder to diversify! Whether you are an adherent to factor investing principles or not, styles rarely translate 1:1 abroad.

Okay folks, Rob is back next week. Until then, Happy (almost) Friday.