If you started your investing journey at any point in the dozen or so years prior to the global pandemic, today’s challenges will look very strange to you. The decade or more market environment of low inflation and ultra-low borrowing costs was a fertile framework for growth investing, yet the reopening of the world post-Covid has cooked up a toxic stew of wealth-sapping inflation and rising interest rates.

Whether the pendulum has meaningful swung to traditional ‘value’ strategies remains an open question, but if you are starting to think that your personal portfolio could do with a little more exposure to companies that derive their intrinsic value from their ability to generate cash, pay reliable dividends, and provide a bit more margin of safety for investors during uncertain times, you are not alone.

Value investing is an approach that places a high emphasis on pricing anomalies in the market. A value strategy requires seeking out companies where the current price of a stock undervalues the business, in the expectation that over time the true value of the business will be recognised, and the stock will be re-rated by the market.

There are risks. Many businesses whose shares trade on a low price to earnings multiple do so for good reason. They may have wafer thin profit margins, little revenue visibility, are structurally challenged, being managed poorly by the top brass or a combination of all or more of these factors.

INCREASING EXPOSURE TO VALUE THROUGH ETFS

Which is why ETFs with a value slant can add real ‘value’ to investors, neutralising the need for lot of detailed research while spreading the risk in the hope that the performance of those stocks that do re-rate higher over time will outgun those that do not.

Finding suitable ETFs for this purpose is made easy too. There are any number of websites and data services, some free, others paid-for, but Shares has found JustETF.com to be a good place to search cross-assets and cross-styles.

Concentrating on equities in this feature, the ETF Screener tool allows you to zoom in on equity-based ETFs-only, before refining your search further by selecting the Equity Strategy, then
Value options.

This throws up a list of 25 ETFs, which Just ETF assesses as having a value investment aim. Some offer global exposure, others are more specific, focused on geographic markets, such as the US, Europe, Emerging Markets, or other focused strategies within a value remit. The ETFs come with annual charges ranging from 0.18% to 0.75%.

It is worth noting some of the funds are listed on the German XETRA market, although these should be available on most investment platforms.

HIGHLIGHTING VALUE ETFS

The iShares Russell 1000 Value ETF (R1VL) is London-listed and offers the lowest annual charges of the value ETF options, with an ongoing charge of 0.18%. The fund seeks to match the Russell 1000 Value UCITS 30/18 Capped index, which itself tracks the large-cap value segment among US stocks. The top holding is Warren Buffett’s Berkshire Hathaway (BRK.B:NYSE), followed by Exxon Mobil (XOM:NYSE), JPMorgan Chase (JPM:NYSE), Johnson & Johnson (JNJ:NYSE) and Procter & Gamble (PG:NYSE).

Do not be put off by the meagre £6 million
of assets under management, the fund was only launched in June 2023, and we would expect it to attract plenty of investor interest over the coming months, particularly if value strategies start meaningfully outperforming.

The SPDR MSCI Europe Value ETF (EVAL) applies its value strategy to the MSCI Europe Value Exposure Select index, which tracks large and medium-sized European companies with a higher quality slant. In other words, it tracks the wheat of the wider MSCI Europe Index while cutting lose the chaff.

Top stakes include London-listed companies British America Tobacco (BATS), Shell (SHEL) and HSBC (HSBA), plus large caps from France – STMicroelectronics (STMPA:EPA), Stellantis (STLAP:EPA), Germany – Deutsche Post (DHL:ETR), and Switzerland – Novartis (NOVN:SWX) and Roche (ROG:SWX).

CHECKING UNDER THE BONNET

With an ongoing charge of 0.25% HSBC MSCI World Value ESG ETF (HWVS) is the cheapest
way to track the MSCI World Value SRI ESG Target Select index, a collection of stocks from developed countries worldwide which are selected according to the value factor strategy and ESG criteria (environmental, social and corporate governance). The parent index is the MSCI World index.

That biggest holdings include tech heavyweights like Microsoft (MSFT:NASDAQ), Apple (AAPL:NASDAQ) and Adobe (ADBE:NASDAQ), which may have some readers wondering about the value credentials. If so, a little further digging may be required to assess if this is a value ETF for you, although there is plenty of insight information available on its website.

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