Make sure you did the correct regression, with the correct factors held constant.Counterpoint: AVUS, at least based on PV's factor regression analysis, does not have a large, nor statistically significant, exposure to "quality." In fact, by the AQR quality metric, VTI actually does have a small exposure to quality, whereas AVUS does not.I think you are correct that "value" induces negative "quality". But I think the quality factor is on par with the "value" factor, especially the combination of the two. Look at AVUS which almost replicated VTI despite measurably less MAG7 and despite a "value" failure during that period - check out AVUS vs. VTI vs. VTV (Vanguard Value ETF) on testfol.io. I know it's just a short period so not much if anything can be concluded, and the whole chart may be biased by MAG7 idiosyncrasies (although whatever AVUS did differently from VTI and VTV, compensated for its diminished MAG7 exposure AND for its [slight] value tilt relative to VTI).
The party line answer, I think, is that a fund with strong market exposure and even a small value/size tilt will outperform an equivalent fund without the size/value loadings on average. That's the best explanation I can come up for AVUS' performance - it'll just outperform VTI under most circumstances. No idea if that is actually true, but I am still thinking of replacing my taxable total market holding with it. But I personally need more data.
If you look at the Morningstar factor profiles, AVUS is not directly comparable because of its small tilts, but AVLV is presumably an AVUS on steroids with about the same value tilt as VTV per the Morningstar profile, but you can see that it has much more "quality" tilt than VTV. You have to measure the quality tilt not in absolute terms, but within the n-factor regression.
Statistics: Posted by comeinvest — Sun Feb 02, 2025 10:32 pm — Replies 47 — Views 13425