I was browsing a list of ETFs the other day, as you do, when I stumbled upon something I’ve been waiting a very long time for: a global small cap value ETF.
Value stocks are the subset of risky stocks that are deemed ‘undervalued’ by investors.
According to the value thesis, these ugly ducklings are excessively shunned, lowering their price relative to their potential.
Hence, you can pick them up for a song, Moneyball style, and wait for them to outperform the market over time as their true worth is realised.
But the risk premium associated with value – the performance bonus potentially available beyond the market return – is overwhelmingly concentrated in the small cap corner of the stock universe.
This means you can only really expect value to pay off when you invest in firms that are both smaller and cheaper on balance.
We can verify this using long-run data going back to 1927. The record shows that long-only US small cap value beat the US market by 2% per year on average.
Value works in other world markets too. I’ll post some charts in a follow-up post.
For now, I’ll just comment that there’s no reason to think the value premium is dead, though it’s underperformed in the US since 2013.
The data also confirms that large cap value does not deliver – at least not in the long-only form we can invest in.
Small bargains
Ideally then, to capitalise on the value premium we’d invest in:
- A small cap value fund
- That’s globally diversified
- With an investing approach backed by credible independent research
- Including techniques to mitigate the drawbacks of real-world value strategies
- That’s accessible to anyone for a reasonable fee
It’s always been impossible for UK DIY investors to tick all those boxes – until now.
The Avantis Global Small Cap Value ETF (AVSG) checks them all. So much so that I invested in it before finishing this review!
Hopefully by the time your patience runs out I’ll have explained why I’m so impressed.
What makes for a strong small cap value fund?
We want a fund that:
- Captures size and value traits as purely and consistently as possible, using sound definitions of the factors.
- Incorporates mechanisms such as a profitability screen to try to filter out undesirable value stocks.
- Combats style drift – that is, the tendency for stocks to move out of the small cap value part of the spectrum as they rise in price.
- Diversifies your overall portfolio. (If your chosen value ETF is full of Cisco Systems, Toyota, HSBC, and Shell, then it probably overlaps significantly with your global tracker fund, and so offers a diluted version of the factor.)
- Clearly articulates a transparent investment process for reliably doing all this.
- Keeps costs down.
We should also be able to use widely accepted valuation metrics to check that the fund is doing its job.
The AVSG ETF delivers on all of those points. I’ll show you how with some data in a sec.
What about track record?
Track record is the glaring omission from my criteria above.
Aren’t returns important?
Yes, once we have five years worth of results (and ideally much more) we can test a fund against its direct competitors.
But AVSG only launched in September 2024. Hence there’s no way to pit it against rivals in a worthwhile apples-to-apples performance contest.
Moreover, the UK’s Soviet-style supermarket of small value funds means we’d be comparing an apple with a turnip, one mouldy potato, and a suspicious-looking purple thing.
Happily though Avantis has been operating in the US since 2019. The consensus from the critics has generally been a big thumbs-up, and investors have rewarded the brand by moving billions into Avantis ETFs.
What’s more, we can try to reassure ourselves that AVSG specifically won’t prove to be a lemon in the UK by checking how its US-domiciled equivalents have fared since their launch in September 2019.
That’s possible because AVSG covers the same territory as two US ETF stablemates:
- Avantis International Small Cap Value (AVDV)
- Avantis US Small Cap Value (AVUV)
Let’s match those two ETFs against their competitors using the amazing Portfolio Visualizer tool to see how they’ve performed.
International small cap value face-off
Avantis’ main rival in this category is Dimensional Fund Advisors (DFA):
It’s a dead heat! The annualised nominal USD returns for the two funds over the longest comparable time frame (October 2019 to end of April 2025) were:
- Avantis’ AVDV: 10.17%
- DFA’s DISVX: 10.25%
DFA has been the acknowledged master of the investible value factor since the early 1990s. Matching the DFA fund from launch is no mean feat.
And while DFA funds are available in the UK, that’s only via financial advisors.
This frustrating situation may be changing – the firm is advertising for ETF roles in Europe. Previously DFA has made its funds available to the wider American public in ETF form, too.
But for now the DFA funds are no-go in the UK if you’re going it alone.
US small cap value face-off
Focusing specifically on the US, Avantis bossed a wider field of contenders in this category:
Again these annualised returns hail from the longest time period available, October 2019 until end of April 2025:1
- Avantis’ AVUV: 11.1%
- DFA’s DFSVX: 10.0%
- Vanguard’s VBR: 8.3%
- iShares’ IJS: 5.3%
These results, plus the products’ underlying metrics and the analysis of Avantis’ ETFs by noted US commentators such as Allan Roth and Larry Swedroe – not to mention the well-informed Bogleheads community running a slide rule over them, too – dispels any concern I have about Avantis being an unknown quantity.
The Avantis funds are doing an excellent job in the US and I have no reason to think they won’t do the same in Europe.
Is AVSG a good small cap value ETF?
I believe AVSG is the real deal, and I think we can independently verify its small cap value credentials using data aggregator Morningstar.
Morningstar provides the only way I know of to compare the factor exposures of funds available to UK investors.
First, go to the Portfolio page of AVSG’s Morningstar profile.
Then check out the Stock Style section:
The bulk of AVSG is found in the small value square of the grid.
Excellent!
That’s better than DFA’s Global Targeted Value fund:
You can see that DFA’s fund isn’t as small value-y as AVSG.
ZPRV, the SPDR MSCI USA Small Cap Value ETF, does contain more small value exposure:
However it’s 100% US and hence less diversified. (You can pair ZPRV with ZPRX for the European dimension, but you’re still not covering as much of the planet and with twice as much hassle.)
Finally, here’s the iShares Edge MSCI World Value Factor ETF (IWVL):
IWVL is globally diversified. But its stock style reveals it to be a large value ETF. Historical returns tell us we can’t expect large value to deliver a significant risk premium.
All told, I think the Stock Style survey shows that AVSG’s small value chops are worthy of further investigation.
AVSG’s fundamental valuation metrics
I also want to check that AVSG scores well on a range of commonly accepted value metrics.
Morningstar does the honours once more:
The lower the scores in the green box, the more value-y the fund is. And AVSG does well again – outranking ZPRV and DFA’s fund, though I won’t trouble you with their screenshots.
Remember, we’re not looking for absolute numbers or particular thresholds. The metrics are useful insofar as they enable us to assess AVSG versus comparable choices.
Ignore the category and index numbers if they’re inappropriate. In this case, Morningstar has served up off-point small / mid cap benchmarks, skipping the value side of the coin.
Hit the Market Cap button in the Style Measures section to see the average market cap of the fund’s holdings.
We want this number to be teenier than thou to confirm the fund’s small cap credentials:
| Fund | Av market cap ($bil) |
| AVSG | 2.09 |
| DFA Glb Targ Val | 5.37 |
| ZPRV | 4.07 |
As the picture builds, AVSG looks bang on the small value money.
So shall we call it a day?
Unfortunately the value trap lies in wait.
Avoiding the value trap
A value trap is an investment that looks like an absolute bargain. It lights up the valuation metrics because it’s cheap.
But it’s cheap for a reason. The reason is it’s junk.
Good value funds and indexes sieve the rubbish with a profitability screen.
We can get some sense of how well AVSG does this via the quality measure in Morningstar’s Factor Profile:
Quality is a variant of profitability. AVSG’s quality score is higher than DFA’s comparable fund, and DFA is well-respected for using profitability screens to enhance value funds.
Ignore the fact that the quality score looks objectively low and is below the category average.
You wouldn’t expect a small value fund to score highly for quality, and the category benchmark is off as previously mentioned.
All I’m looking for is evidence that AVSG’s stocks aren’t scraped off the bottom of the bargain bin. Its quality score of 77 (the 77th percentile for quality in Morningstar’s stock universe) offers some comfort on that front.
DFA’s fund lies in the 85th decile for quality. It holds even less in the way of profitable companies – yet DFA’s value funds set the standard for the industry.
Morningstar doesn’t score ZPRV but IWVL (iShares’ large value effort) also floats around the 85th decile. So in comparison to other value funds, AVSG looks, well, quality.
Negative momentum
Momentum exposure is also worth an eyeball.
Team Avantis describes how value funds can be adversely affected by negative momentum. (Monevator articles can also suffer from this phenomenon.)
Picture a stock dropping in price. This price slashing can place a stock firmly in the value zone per traditional measures such as price/earnings, price/book, and so on.
But the chief insight of the momentum thesis is that stock price declines (and gains) typically continue for some time.
Why rush into catching a falling knife when it’s probably got further to go? Better to buy it closer to the bottom and then hope to cash in if and when it finally ascends.
Avantis attempts to harness momentum by delaying purchases with large negative six-month returns and, conversely, the sale of stocks with large six-month gains.
You would expect a value vehicle to score quite poorly for momentum. DFA’s fund is 84th decile.
But AVSG is 60th decile, which suggests it’s succeeding in dampening down negative momentum.
The light blue shading in AVSG’s Factor Profile above reveals each exposure’s historical range. You can see its momentum score is swingy.
But the lack of shade in the style2 and size categories shows the fund has remained firmly rooted in its target factors. It has not been afflicted by style drift since its launch.
Taken together, AVSG’s metrics suggest it’s a top-notch small value ETF.
What on Earth are they up to?
The Avantis team has written an excellent guide to its methodology called Our Scientific Approach To Investing.
ETF providers rarely write such a clear explanation of their investing process.
The major firms pump out scanty marketing gloss that typically leaves me wondering if they think their customers are idiots.
Or they produce indecipherable exercises in obfuscation, designed to make you think you are an idiot.
In comparison to those poles of customer disservice, the Avantis paper is a masterclass in transparency.
Granted, they’re not telling you where all the bodies lie. But they do explain what they’re doing and why.
It makes sense relative to my grasp of the academic literature, and you can follow the citations to sanity check any aspect of the strategy.
I won’t regurgitate the paper but it’s well worth a read if you’re interested in this ETF. It reinforced my sense that AVSG is a good choice for a world small cap value fund.
(Not to mention the only one!)
Closing remarks on AVSG
Avantis is a sub-brand of global asset manager, American Century. American Century appears to be reasonably well-regarded, while Avantis was spun-up by ex-DFA executives – no doubt explaining the impressive value fund execution.
AVSG’s 0.39% OCF is not cheap, but it’s not expensive for what it is either. I wouldn’t think twice about that price tag if I wanted small value exposure.
It’s an actively-managed ETF so it doesn’t track an index. That’s how DFA funds work too, and it appears to be an advantage in this category.
The ‘global’ moniker means developed world really. Emerging markets are excluded.
Still, AVSG is amply diversified with 1,300 stocks. Check out the holdings and you’ll quickly see there’s no danger here of replicating your global tracker positions.
Scan the sectors and you’ll also see useful differences. For example, AVSG is just 5% tech versus 25% in Vanguard’s Developed World ETF (VEVE).
The Avantis fund won’t reduce your US exposure – but it may help if AI-driven large caps falter.
Diversifying your sources of return like this paid off handsomely when tech stocks imploded during the Dotcom bust. The S&P 500 dived -38% in those years. Meanwhile US small cap value advanced 19%.3
Still, who knows whether that will happen again? Or if small value will outpace the wider market in the future?
Moreover AVSG is liable to give you a rough ride along the way. Check out the volatility measure above.
Indeed the reason small value is expected to earn market-beating returns is because it loads up on very risky stocks. Thus AVSG is not for the faint-hearted or anyone who doesn’t know how they react to stock market reversals.
Pros
- Excellent example of a small cap value fund
- The only globally-diversified iteration available to UK investors without jumping through DFA hoops
- Metrics look good
- Well conceived and clearly documented investment process
Cons
- There’s no guarantee small cap value will outperform the market. In fact it hasn’t for over a decade.
- It’s risky!
Take it steady,
The Accumulator
![Why small value is worth investing in [Members]](https://monevator.com/wp-content/uploads/2025/05/US-risk-factors-vs-SP-500_growth-1024x458.png "Why small value is worth investing in [Members]")
Thanks @TA, great spot and a thorough, compelling review – much appreciated. Wish the Morningstar ‘Analyst Research’ pieces were as readable! Speaking of our chums at Morningstar, any recommendations for alternative portfolio trackers?
So do we now have a good way to build the “Weird Portfolio”?
(https://portfoliocharts.com/portfolios/weird-portfolio/).
It’s a very attractive idea for people who want to dodge mega cap blowouts.
I do notice, though, that Large Value (e.g. IWVL adjusted for the currency shift) is a rare winner this year, whereas this AVSC is not beating plain small WLDS. Any idea why Large Value is ahead but not Small Value?
Excellent write up. Cheers @TA 🙂
ZPRX and DGSE ETFs used to be the ‘go-to’ for ex US SCV in the UK as the PRIIPs, MFiD and UCITS reg’s blocked access for UK ISA and SIPPs to the US ETFs covering SCV.
Avantis very highly regarded over at Rational Reminder as well as Bogleheads.
Only issue with AVSG is the US component if you want to pair with US large growth (SP20) for a barbell. Avoiding US SCV is a purer expression of that as you’ve thrn got geographic as well as style diversification. Can’t have it all though 😉
Have enough Small Caps in my Vanguard US Equity Fund at similar performance so will stick with that but great and interesting article.
Very unhelpfully, IBKR says AVSG is not allowed in its ISA. No idea on what basis they made that decision.
@2 more years – Cheers! I’ve been pretty disappointed with other portfolio trackers – at least the free ones I’ve tried. I’m gonna take another look at Trustnet but I rejected it in favour of Morningstar back in the day. Have you found anything useful?
I’ve been building and automating my own spreadsheet which I’m happy with. I guess most people want something slicker than that?
@meany – Absolutely, all those portfolios that include a value component are now properly viable without having to bodge it. I know we’ve had large value options for years but the factor premium is weak to non-existent in this part of the spectrum.
I don’t know why large value is ahead in 2025 but it’s worth noting that any group of stocks can beat any other in the short-term. I try not to be influenced unduly by the gyrations as it’s the return over years and decades that’ll make a material difference.
@Howard – I didn’t know Rational Reminder had covered Avantis. That’s good to know! I guess you could get non-US small value exposure via ZPRX.
Yahoo finance is about the best Free Portfolio tool, in the fact that it handles most (if not all ) transaction types, whereas Trustnet simply doesn’t do sales.
@2 more years / TA – I’ve switched from Morningstar to Portfolio Performance. It’s open source, has a well established user community and has been around since 2012. It also has much more functionality than Morningstar.
I managed to import my 100+ transactions from Morningstar automatically into it. It was a bit of a faff but can explain how if that would be useful.
https://www.portfolio-performance.info/en/
Not available via interactive investor???
Do we know what active means. Is it a:
Smart Beta
Smart Beta where they tweak the rules from time to time (how often)
Active fund with active stock picking from the universe of stocks defined by their rules.
Not available at Trading 212, so probably not at Interactive Brokers. Having said that it is available at HL and Investengine.
@platformer – it’d be amazing if you could give me an idea of how to port over transactions. That’s the part I’m gutted to lose. Will check out Portfolio Perfomance and @Mark – Yahoo Finance. Thank you for the recs!
@Geoff – ask ii to make AVSG available to you. IIRC they’re responsive to requests.
AVSG also available at AJ Bell and Fidelity.
@Martin – AVSG is described as an active ETF but you can drive a fleet of buses through the descriptive holes in investing terminology. Everything I’ve read indicates that scope is defined by a systematic attempt to capture small value – as defined by the academic literature – but adapted to real world execution. So the team will assess candidate stocks that are signalling “small value” but could be junk. They also deploy DFA-style patient trading techniques to avoid style drift and excessive turnover due to noisy signals.
The paper I’ve read explains their approach and then various other commentators have given the nod. Including William Bernstein among others.
Like DFA, Avantis is staking their reputation on offering a concentrated and consistent risk factor exposure. That’s exactly what I’m looking for.
@Mark. It IS available at IBKR, but not in the ISA – they made me sell it with threat of liquidation as they said it wasn’t allowable in an ISA (which is obviously not the case as many other platforms allow it in ISA and it’s a qualifying ETF AFAIK).
I have been toying with the idea of a 10-20% allocation to this fund..but can we really see small caps outperforming in Trump’s Terrible Tariffs environment? Surely small caps will be hit hardest? Great article anyway thank you
I’ve asked ii to add the ETF today. They’ve declined and gave this explanation –
“Unfortunately, we are unable to allow this ETF for trading due to failed or missing VFMA. Fund/ETF managers must confirm if their ETF/Fund is good value for money, and justify their charges, etc, by completing a ‘Value for Money Assessment’ (VFMA). We haven’t received one for this ETF, or they have confirmed that their fund is not a good value for money, which is the reason it is not allowed on our platform. ”
Maybe they will reconsider if a few of us ask …..
Thank you @Platformer and @TA. Likewise been disappointed with alternative free trackers. Tbh wouldn’t object to a subscription service if there was one that fitted the bill. Portfolio Performance looks interesting, but won’t be able to fully explore this option until I swap my (installation locked) work laptop for the (hopefully not too far away) retirement edition. I will export the Morningstar data before it shuts down, though.
@Mark, I gave Yahoo Finance a go. It’s not bad, but couldn’t cover all of the funds and also doesn’t seem to have an option to include cash. Until then, the best quick option I’ve found is to convert tables pasted from Morningstar Portfolio into Excel to calculate key metrics and update with prices from platform watch-lists. Not ideal and hardly feature-laden, but it’ll do for now!
Was using the Vanguard Global Small Cap Index Fund recommended here:
https://monevator.com/how-to-invest-in-small-caps-passively/
But if I were to switch to AVSG then I’d assume more volatility but higher potential returns.
P.S. Also, another person highly recommending Portfolio-Performance.info – but with a warning. Steep learning curve and takes forever to set up, but worth it in the long run.
Further to comment #14 I asked ii to reconsider and request the Assessment again. Here’s the reply
“While we appreciate that this ETF may be available on other platforms, we rely on the fund/ETF managers to complete and submit the VFMA to confirm the fund’s value for money. Without this confirmation from them, we are unable to enable the ETF for trading.
However, I have raised a request with our Trading Team to review this ETF again. Once I have a reply, I will notify you of it.”
Maybe if more of us push they will join the other platforms in offering it ..
@Mr Americano — Well there are ways in which small caps could benefit from the direction of trade policy (albeit the market seems to assume that sanity is being restored post the US/China ‘deal about a deal’ over the weekend).
For instance, small caps are often more domestically orientated, so may be less susceptible as a group to first-order trade impacts (though they’ll suffer of course if tariffs cause an economic slowdown).
Trump is also promising tax cuts, which could help US small caps at least. This was in-part the rationale for the market’s initial strong showing on his election.
More generally, as you probably know it’s usually best to invest in factors (other than momentum I guess! 🙂 ) on a long-term view, and without any guarantees. 🙂
@Robin H – what a load of old faff. Good for you for pushing. I would guess Avantis have a small UK presence at the moment and will tick the appropriate boxes for ii in time.
On @Mr Americano / @TI #14 / #19:
There’s a 2024 study by Nikolay Doskov, Thorsten Hens, and Klaus Reiner Schenk-Hoppé on effects of factor flows (based upon data across 14 exchanges from 1995 to 2020).
Basically, if 1% of global market cap moves to momentum strategies then performance of that factor declines 8.6% over the next year, whilst for quality the same inflow sees a decline of 7.7%.
But for the value factor, a 1% inflow by global market cap only knocks the next twelve months’ returns by 4.6%, and for the size factor (small caps) it’s just a 2% decline.
However, value and small cap strategies have the least capacity, and their outperformance disappeared if just 0.17% and 0.07% of market cap flowed into each factor globally.
The best predictor of the outperformance of value and size were increasing flows into momentum, with 1% of total market cap flowing into momentum improving the return of the value factor by 0.6% per year and the size factor by a weighty 1.84%.
Small cap value performance should, therefore, benefit from net flows into momentum as winning stocks become more highly capitalised and expensive relative, respectively, to small caps and to value stocks.
I can confirm AVSG is available at both HL and iWeb. Avantis’ emerging market fund (AVEG) wasn’t available at either of those two when I last checked (possibly due to its current small size).
Optimized Portfolio did a bit on the US funds last year:
https://www.optimizedportfolio.com/?s=avantis
I felt the case was pretty good and have AVSG for my small cap exposure, with a small bit in EMSM to cover emerging market small cap ( no value tilt available there though)
Windy
I requested via ii a couple of months ago and got the same response. Hopefully they’ll add it, but in the meantime I’ve bought it on HL.
Not available on ii but have I have asked them. Maybe if everyone asks they will make it available? It is on the LSE after all.
I have also asked for it on II
Ii say they can’t list it because the have not received a value for money assessment from the fund manager?
I wondered if it was worth getting in touch with Avantis with the response from ii, and see if they can supply what’s required?
Hi John I have and they will! Avantis said:
“We apologize for any inconvenience you’ve experienced so far.
We are currently preparing an Assessment of Value report, which will be shared with Interactive Investors once finalized. This report will enable our products to be traded on the Interactive Investors platform.
We will keep you informed as soon as it is available.”
Hi TA,
On a similar subject I had been looking for many years for an International (ex-USA) Stock ETF and recently came across X Trackers ticker: EXUS
It has grown AUM to £1.3bn within a year or so. Investors clearly need it !
AJ Bell and Barclays offer it on there platform and is ISA & SIPP compliant.
Disappointingly Hargreaves do not allow access to this ETF. They said X Trackers would not provide KIID docs to there third party, some company called FCS Broadridge. I have reached out to X trackers but no reply so far. Odd that AJ Bell and Barclays had no issues.
@Chris Awesome. The power of Monevator Members!
available on T212
@TA Morningstar says they will add the ability to “export your portfolio data” in July but haven’t said exactly what that will include. Presumably it will include a spreadsheet output of all the transactions in which case you could just wait for that.
If you’d rather set it up now then:
1) Go to the transactions input page in Morningstar. Print each page to PDF. You can show max 100 transactions on one page and will need to click to show the next page.
2) Upload the PDFs to Deepseek with the prompt “Convert these PDFs into a CSV file”.
3) Download the output which will be a .txt file. Change the file extension to .csv. This output was perfect for me other than 1 transaction being missed at the end of a page.
4) Use that to import the transactions into Portfolio Performance using section 4 of this guide: https://help.portfolio-performance.info/en/reference/file/import/csv-import/
If you hold securities priced in pence not pounds (like Lifestrategy), there are a few additional steps as explained here: https://help.portfolio-performance.info/en/how-to/import-gbx/
Few tips:
– Wouldn’t bother adding the Yahoo ticker for securities (which brings in prices) you no longer hold, unless you want to see historic volatility vs returns in your portfolio
– You can avoid having to set up a deposit account by ticking the “Convert buy/sell transactions into inbound/outbound delivieries” when importing the CSV. The deposit account lets you track when you funded the cash and made the investments for a more precise IRR.
Agree with AM that the time to set up is worth it in the end (and hopefully only something you do once!)
@TA I replied with a relatively long post but it’s stuck in moderation!
Excellent write-up. Particularly appreciate the faceted analysis. I’ve been looking for a value-focused ETF like this for a while too.
Does Monevator have any partnership or relationship with Avantis?
@Chris – no, we have no partnership / relationship with Avantis. We’d declare it if there was one.
@platformer – thank you very much for those clear instructions. I really appreciate it. Will have a go at that tomorrow.
@Rammy – That’s such an odd reason to give. HL or Broadridge could download the KIID doc themselves: https://etf.dws.com/en-gb/AssetDownload/Index/52b6d891-f550-47e9-8dac-fdc98e9d56e1/DWS-UKKIID-IE0006WW1TQ4-GB-en-2025-03-21.pdf
You could always cheekily send it to them just to show ’em what a ludicrous reason that is.
Thanks for this – nice find. I loved “So much so that I invested in it before finishing this review!”
Really thorough write up. I must admit the unbridled enthusiasm surprised me too, but pleased to see no affiliation confirmed. I will write to II — but perhaps someone over at Avantis might get their crayons out and fill in the required form…
I had a nose through the holdings for UK companies — lots of tiny stakes in interesting businesses from ecommerce to brewers.
Like many passive investors, I am alarmed (though somewhat enriched) by the massive concentration, across my world trackers and even quality/value tilted funds, in a handful of American techs, run by people that increasingly resemble cartoon villains. No chance of any serious duplication with this fund. I’m very interested for diversification.
It is available for SIPPs at least at HL, I note.
@GM — The unbridled enthusiasm surprised me! It’s not really on-brand for TA. 😉
Keep in mind he’s been looking for the perfect small cap value ETF for nearly two decades though. (E.g. https://monevator.com/uk-small-cap-index-tracker/)
For a while he was even personally using an actively-managed UK small cap value trust I’d recommended (Aberforth Smaller) though I presume that was purged in a holy ritual long ago…
II was (uncharacteristically) quick to respond to my AVSG query:
“I have spoken to our Global Trading Team for you, and they have advised that without a VFMA, you will be unable to purchase this.
Please refer to CP24/16: The Value for Money Framework | FCA.”
So asking Aventis is our best bet.
G
Thanks @Chris!
Fingers crossed that does the trick.
Very useful thanks – also been looking for something like this for some time.
@GM and TI – I have unbridled enthusiasm for strategic diversification and not much else 🙂
@All – loving the Monevator Massive bringing their weight to bear on slow-coach UK brokers
I’m stuck (pretty contentedly) in a long-term multi-decade holding of The Global Smaller Companies Trust (GSCT) and can’t really offload too much each year due to CGT constraints. Back in its heyday the Trust was one of my best performers and it has retained a sentimental spot in my portfolio.
I’ve not looked closely at a direct comparison over the past 6 years between this old Trust and AVSG, but i get the impression that the performance is reasonably similar(ish), plus, in addition GSCT currently trades on a 10% discount, so i’m blindly convincing myself that i’m not losing out too much, even though i’m being stiffed on the higher ‘old school’ annual charges etc.
Available on the Fidelity platform too (though I’ve been girding myself to swap platforms since I’m long past the tipping point where flat fee is better).
Thanks for the article!
@TA – I was going to ask about Aberforth Smaller Companies Trust (ASL) so pleased to see you’ve mentioned it. I still own this since way back (covering UK small/value), after reading Hale and then finding ASL mentioned in these very pages (I recall @Ermine mentioning too). I wondered if, in the spirit of greater diversification (ie choosing world over the UK for this asset class), this could be a viable alternative?
https://mailchi.mp/verdadcap/quality-or-value-why-not-both?e=b81e67c7ed
My wife from her account has also asked II to add avsg for trading
Great article by TA and an excellent find.
I have also petitioned II to make this ETF available. Frankly II has really deteriorated – its fees are now higher than a number of competitors but its platform and service (including lack of tradeability) is becoming worse.
Seriously thinking of transferring out my ISA – would move to AJB but already have a SIPP there. What has been the experience of others with iWeb?
Thank you for this write up. I currently only invest in VWRA (2.57% small cap) so looking to diversify with a 10% weighting in my portfolio in small cap.
I’m surprised to see such a strong endorsement for an active fund. I’m a little confused as to why this would be considered a more rewarding investment compared to exposure from something like WSML (iShares MSCI World Small Cap UCITS ETF), which has a lower expense ratio and higher diversification of companies in the fund. Would anyone be able to advise? The plan being to buy each month and hold for 30 years.
Thank you in advance!
Great article, thank you so much.
I follow Tim Hale’s Global Tilt portfolio. I went back and reread a few chapters of Smarter Investing, and Tim advocates for the value and size premiums, but doesn’t mention them together. So he recommends:
Developed value, mainly large caps
Global small cap
From a product perspective, this is achieved through:
12% UBS FTSE RAFI Developed 1000 (Developed value)
12% iShares MSCI World Small Cap UCITS ETF (WSML)
78% iShares MSCI ACWI UCITS ETF (SSAC)
Would the use of small cap value REPLACE the allocation to developed (mainly large cap) value and global small cap value? As in, should I replace the UBS fund and WSML ETF with AVSG in a oner?
Graham would endorse it:
http://www.bylo.org/bgraham76.html
I recognise this theory is slide 1 of every underperforming active small cap manager’s marketing pack but surely in this most under researched, unloved, under owned, undervalued(?), inefficient corner of the market it’s better to be bottom up and concentrated than using screening to assemble a portfolio of 1,300 stocks.
Easy to argue that theory, less easy to name an active small cap value fund that has delivered on it consistently though!
@Vilehackwriter – your name made me laugh. I guess you probably know but you can effectively turn Fidelity into a flat fee broker by investing in ETFs. It’s £7.50 a month for a SIPP on that basis.
@DaleK – Yes, assuming ASL’s metrics still look small-value-y this is exactly how I used to get UK small value exposure. I haven’t checked in on ASL for a while and sold it off in a bid to simplify my portfolio. You could analysis it on Morningstar in the same way I have AVSG. You could compare it with that over-priced iShares UK Small Cap ETF and a FTSE 250 ETF?
@Geoff – is your wife from her account secretly you? Mrs TA and I sometimes have a similar arrangement.
@Faustus – I generally hear good things about iWeb from other Monevator commenters. I have an account but check it barely once a year. I’ve always found iWeb fine to use. It’s an eyesore for sure but my needs are few.
@MB – the issue with active funds is they charge too much for average performance. If active funds do not over-perform as a group, and it’s near impossible (except through luck or being incredibly skillful) to pick the winners in advance, then you’re likely to be better off with a tracker – because you’re paying less for market matching performance.
In AVSG’s case there isn’t a tracker available that will do the same job.
In the US, where cheap small value trackers are available, they generally underperform the DFA and Avantis funds that are dedicated to the small value strategy for a higher fee.
On that basis, I’d pick a tracker to cover an asset classes (like global equities) where the evidence suggests active funds don’t win.
(By which I mean active funds that you can identify in advance. An active fund is always gonna top the table but could you have predicted which one it would be ten years ago?).
And I’ll occasionally pick an active fund to access a particular niche where it’s the only choice or clearly the best choice – and I’m sure management won’t drift away from the stated strategy. (And the fund isn’t hideously expensive.)
In my case, I’ve only ever found this necessary when trying to gain small value exposure.
Finally, the historical record has shown that small value outperforms small cap over time (by enough to outweigh cost differentials).
You could hold both or one or none.
There’s no guarantee that either small value or small cap will outperform the market in the future. One of them could outperform while the other factor does not.
Ultimately we hope to be rewarded for taking additional risk. That – plus the historical track record – is why you’d expect small value to beat small cap over time.
It’s not a done deal though. No guarantees. Over 30-years you stand a good chance of it paying off. But over the past 15-years I’d have been better off investing all my risk factor money into a global tracker instead. Hope springs eternal!
@CM – Small value and small caps are different risk factors so you could just boot out the USB large value fund and retain a foot in the small cap camp. Personally speaking I’ve used AVSG to replace both.
@AoI – As far as I can tell, DFA small value funds have delivered whenever small value delivers. And they’re subdued when small value is subdued. They do appear to be consistent. If we’re talking about a strategy that always wins then that’s another matter…
@Chris I copied and pasted your message from Avantis and forwarded it to II as part of my ongoing conversation with them. The response is as follows –
“We appreciate you sharing the update from Avantis regarding their VFMA. I have forwarded this information to our Trading Team. Once the report is received and reviewed, we will update the status of the ETF on our platform accordingly.”
Fingers crossed …!
Sorry TA, are you saying you’re exclusively using AVSG for BOTH your small cap and value exposure? So no other small cap funds/ETFs or value funds/ETFs?
I was thinking to ditch both UBS large value funds and iShares Global small cap for AVSG in one go…
@Chris thank you to you and everyone that went before me as I sent a version of your message to II and they rapidly got back to me with the following:
Our Global Trading Team have reviewed the investment and have advised that it should be set up to trade from Monday 19th of May.
Also as a first time poster must include the obligatory thank you to TA, TI et al for the great website.
@CM – sorry for not being clear – no other small cap or value holdings, just AVSG.
@JC – Cheers! II must be wondering what’s going on 🙂
Thanks TA.
How does the below look for someone who has 21 years until they’re 58 and can access their pension? The reason for the 20% Gilts is because my pot is already just over £300k and 100% equities makes me nervous… I was following Tim Hale’s Global Tilt 80 portfolio, which has 12% WMSL and 12% UBS FTSE RAFI Developed 1000, but I’m not sure swapping out the full 24% for AVSG is the right thing to do!
68% SSAC
12% AVSG
20% VGOV
Following the excellent comments above @Meany #2 and, in particular, @Gregory #51 and @AoI #52: I’d endorse an overweight to SCV and replacing free standing value and small cap with SCV (not least on efficacy and capital efficiency grounds).
The “Weird Portfolio” on the Portfolio Charts link under #2 above is too radical for me, but it would perhaps suit a more risk adverse and/or older investor.
It offers many axes of diversification, although IMHO it might be improved in that regard by splitting Value Stock Geek’s 20% allocation to International Small Blend between Global SCV and a broad commodities ETF in order to increase the former allocation to 30% and to introduce the latter.
I’d also pare down the gold a bit to 10% from 20% and use that to then top up the new allocation to commodities to 20%.
Each to their own of course, and everyone’s mileage will vary.
@CM – So essentially it’s a global equities portfolio with a tilt to small cap value. It’s therefore a little more risky than an 80% global equities portfolio but with a higher expected return. Non-equity diversification is 20% gilts which makes this a fairly aggressive portfolio. The SCV element means it’ll be more aggressive / volatile than a standard 80/20 portfolio.
You mention being nervous about 100% equities and I share that sentiment. Hopefully your investing experience so far reassures you that a 20% defensive allocation is enough to keep you on an even keel if equities crash.
I personally found that – as I passed into my forties, and my pot got bigger – it became harder to stomach an equity allocation of 80% plus when the market slumped. Ultimately, this led me to focus more on diversifying and expanding the defensive allocation as I got closer to my goal.
Hopefully this helps a bit? The right thing to do is always what you’re most comfortable with, I think.
I think I’ll write a post that tries to quantify the difference between the various portfolios on the risk-return spectrum e.g. 80/20, 60/40, 50/50 et al.
Thanks TA! I say I’m nervous, but the blip in April due to Trump’s Tariffs didn’t really cause my much concern. Appreciate it can of course get a lot worse than that!
This is for my SIPP, which when turning 37 later this year, I do think I can (and should) stomach the volatility for the potential higher returns. Just looking at my SIPP and workplace pension this morning, it’s now up to £310,000. So I’ve built quite a decent pot for my age- so on one hand I want to protect what I’ve built up but realistically with 20+ years to go before I can even access it, I wonder if an 80/20 with the tilt to SCV is sensible for such a time frame.
Thanks TA for this incredibly helpful review. I’ve been reading about this fund with interest on the RR forum and have been excited about Avantis have done with UCITS products. The only concern I have is liquidity and thus the spread. Looking on IBKR there is very little available. None of this is a problem for say £10K but I was hoping to use factor funds as 30 percent of my planned portfolio and that concerns me. It’s not unique to Avantis but across the market in Europe. JPGL has even lower liquidity despite having been around for years.
I wondered whether you or others had any concerns about liquidity or am I worrying unnecessarily.
@Faustus: I use iWeb along with Vanguard and AJ Bell and have used InvestEngine, Charles Stanley, x-o and others. If government protection was unlimited and I could only have one ISA manager, iWeb would be my first choice. Great service for many years and, for the range of tools available, user-friendly.
Disappointed they no longer offer SIPPs but their former pension partner AJ Bell are pretty good too, just a tad pricier
@Investor – That’s a good point but it’s a very new ETF, only 8-months old. I’d expect AVSG to have a higher spread than say a global tracker anyway, but it doesn’t seem too bad to me even so soon after launch. Using Hargreaves Lansdown prices:
AVSG: 0.26% spread
VEVE (Dev World): 0.13%
WLDS (Small cap): 0.17%
VFEG (Emerging Market):0.39%
VFEM (Emerging Market): 0.2%
That spread seems reasonable to me for a niche category like small value.
It’s interesting that VFEM and VFEG are two versions of the same Vanguard EM fund but the much larger VFEM has a lower spread. AVSG is still new, so the spread could tighten as it gathers more assets under management. I read an industry article that said AVSG had gotten off to a good start.
@Onedrew and Faustus – So weird that iWeb haven’t appointed a new SIPP partner yet. iWeb are Lloyds Group and both the Lloyds and Halifax share dealing services have appointed the same new SIPP partner. I wonder if Lloyds have made a strategic decision not to offer SIPPs via iWeb? Or if there’s just some odd technical difficulty they’re ironing out?
@CM – sorry, I missed your follow-up comment. It’s a good sign you shrugged off the Trump tariff blip. I guess the question is what if a downturn hit harder, deeper, longer. How would you feel if that pot went down 50%?
You would feel awful, any of us would, but would you panic and sell? Or would you feel miserable day-in, day-out for years on end if it was a long crisis? Forever despondent about the ground you’ve lost? Checking your portfolio every day for signs of recovery?
Or would you be sanguine about it? Ploughing on with your strategy because you know those temporarily embarrassed stocks are on sale? That they will recover eventually. And you have faith that things will come good for you in the end. In the meantime, you’re not pinning your identity on a particular net worth number and are happy carrying on with the rest of your life regardless?
I’m sorry, I don’t mean to be a tosser. I guess I’m being descriptive about it because I personally find it hard to think about risk until it materialises!
Your plan looks good on paper, 20 years is plenty of time. But at the same time, the market doesn’t care about our schedules. And your monkey brain may not care about the theory when stocks are cut in half.
I think what’s nagging at me is while 80/20 seems fine now, do you have a plan to be 60/40 with, say, 10 years to go?
Cos if a big crash hits tomorrow you’ll at least be able to comfort yourself that you’ve got 20-years to make it all back. But if the big one hits when you’ve got 5-years left – and you’re still 80% equities – well, that’s a different kettle of defeat.
@TA @Faustus: In a letter from iWeb dated March 2020 telling us about the ending of their SIPP management arrangement with AJ Bell, we were told that we could choose another provider or do nothing and the SIPP would transfer to their “new pension partner” Embark Investment Services.
Thanks TA. The way you’ve put it is helpful to really understand what a proper market downturn might look like and the effects of it.
If I woke up, logged into my Fidelity account and saw my SIPP down from £310k to £155k, I would be frustrated at the pot that I’ve lost. But I cannot ever see myself selling and locking in that loss. I’d be mindful that I’ve still got ~20 years to go and that it would eventually, maybe years, get back to where it was and then push beyond that.
At 36, in a SIPP that I can access at 58 but there’s no guarantee I will (might still be working), I am nervous thinking about going overly defensive (say 60/40) and losing out on gains over the next 20 years and equally nervous of doing very aggressive (say 100% equities) and risking a big 50-60% pullback. As I get closer to needing the pot, I would start thinking in terms of derisking into more government bonds or MMFs, definitely.
Maybe what I have now (Tim Hales model portfolio) is enough, but I just really like the idea of simplifying into a 3 ETF portfolio, saving fees with Fidelity and the simplicity of the value and size premiums being nearly wrapped up in a single ETF!
68% all world
12% small cap value
20% intermediate gilts
I wish I could somehow backtest this portfolio! That would help the decision process, for sure!
Not sure if this posted successfully on first attempt!
@TA, thanks for highlighting this one. I’ve been looking for an exit/alternative to the UK “dividend dogs” as I call them for some time. The “dogs” track an index of the stocks with the highest dividend yield. Not long after investing suffered a big write down thanks to Carillion. Too late I read a Monevator article that dividend yield trackers aren’t a sensible way to get access to the value factor in the first place. Despite being active AVSG has similar level of fees to the dividend tracker.
@Investor #63, for funds with relatively high bid offers if I can afford to be patient I tend to stick in a limit order at the bid price (if buying) or vice versa. There is usually enough intra-day volatility that the order gets hit and this avoids the spread. The risk is if the market only goes one way and the order is never hit.
@CM – good stuff. I completely understand your dilemma re: offence vs defence. It’s very tricky. You’re damned if you do and damned if you don’t 🙂
I’m just eyeballing the best open source numbers you can get (from the Bogleheads) and I can see that 12% small value would have beaten 24% large value and small cap in both the US and the Rest of the World using the longest available timeframes for both regions. (US numbers back to 1927, ROW back to 1990.) Advisory warning: that doesn’t tell us the same will be true in the future. I know you know this but I gotta say it 🙂
@Onedrew – Interesting! Lloyds share dealing are also using Embark, so you’d think iWeb will take on new SIPP applicants sooner or later.
@Prospector – that’s a nice tip, thank you!
Wow so 12% SCV beats 12% LCV + 12% small caps! That’s very interesting. Thank you so much. Decision made for me. I’ll rotate into AVSG in the week! Maybe rethink if 20% VGOV is enough, or if it’s worth going higher. 4.27% YTM at the moment and would be handy in a crash… Gilts are more appealing than a few years back!
Thanks again.
Hi accumulator, very interesting article, long have I been fustrated by looking at the Small Cap Value outperformance on portfolio charts and not being able to replicate it. Do you think there is room for the small cap value etf and the ishares multifactor etf in the same portfolio?
@Calum – I hear you about Portfolio Charts! Without having checked every last holding in both ETFs, I’m pretty sure there’s not much overlap between AVSG and FSWD.
However, FSWD has recently changed its index. It’s now juggling size, value, momentum, quality and low vol.
Looking at FSWD on Morningstar:
https://www.morningstar.co.uk/uk/etf/snapshot/snapshot.aspx?id=0P00016N3Q&tab=3&InvestmentType=FE
Essentially its value component is large value with a side of mid cap. Nothing to speak of in small value or any part of the small cap spectrum.
Large value barely delivers a premium.
I’m personally not interested in low vol. I think if I was, I’d want an ETF that focused on it specifically.
FWSD doesn’t look like it’s doing anything special on the quality front but looks decent for momentum.
Now I can invest in concentrated small value, my next thought was which risk factors diversify me against small value not paying off?
Momentum and quality/profitability tend to have low correlations with small value.
There aren’t any profitability ETFs and I haven’t got the bandwidth at the mo to work out which versions of quality actually stack up.
So in the end I sold FSWD and bought a World momentum ETF as a risk factor diversifier.
You could also argue that FSWD is a small value diversifier as it doesn’t play in that space.
Sorry that’s a bit convoluted. That was the knock-on effect of AVSG on my portfolio.
Thanks for sharing your reasoning TA, makes sense, cheers.
Calum
Now available on II …..
But you have to start typing “Avantis” for the list to come up. Typing AVSG doesn’t work at the moment….
Well done everyone
An interesting read, comparing whether a two tilt approach of small and value separately is better than one tilt, where you combine small/value:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5199124
This is an Accumulating fund as far as I can see. I assume it pays some income so best avoided for taxable accounts. However, I can’t find an equivalent Distributing version. Please let me know if I’m missing something.
@j_ffs – good name! At least if ffs means what I think it means 🙂
Yes, just acc for now but I’m not sure why that puts you off holding it in a taxable account? You should get a statement from your broker that accounts for dividends.
You guessed correctly – Financial Freedom Seeker! Thanks for the reply…my first comment, and response 🙂
My understanding, not least from years of reading Monevator, is to avoid accumulating funds in a taxable account because of the capital gains’ complications. Your name indicates a bias of course, or perhaps you’ve a crack system for keeping track!
Given that US SCV but, interestingly, not ex US SCV, seems to have stopped ‘working’ around 2006, at around the onset of the GFC, could a case be made that, whilst AVSG ETF is best of breed, it might, in some sense (if the future resembles the past, of course it may not), be ‘safer’ to choose (instead of a Global SCV tracker) either or both of DFEP ETF (European SCV) and/or (maybe) DEM ETF (EM small cap dividends as a nearest available EM proxy to SCV)? Thoughts welcomed.
@j_ffs: Financial Freedom Seeker – ah yes, I thought that’s what it was 🙂 The complication, as you rightly say, is keeping track – as opposed to some differing tax treatment. I just wanted to make sure we were on the same page there. My system is never earning enough to exceed my tax shelters. Problem solved!
As I say, you should get a tax voucher but there are couple of other ways to keep track: https://monevator.com/accumulation-funds-dividends/
Scroll down to the “How to find dividend distributions for accumulating funds” section. Both of these options depend on the fund provider keeping the data aggregators updated. Avantis ETFs aren’t even a year old yet, so it’s likely to early to tell how diligent they are re: dividend announcements.
@Howard – Maybe it’s safer to invest in US small value because it has underperformed for a while? I can see you’re not a fan of mean reversion 😉
I think we need to watch out for arbitrary cut-off points like 2006. Depending on where I cut the data I can show you that:
US SCV beat US large cap over the last 25 years.
Or lost over the last 40 years.
Or won over the last 50 years.
Or won over the last 98 years.
Or from 2000-2013: US small value outperformed US large cap 12 times in 14 years.
2014-2024: US large cap has outperformed US small value 9 times in 11 years.
I don’t think these trends tell us enough about the next 10 or 20 years by themselves.
For example, US SCV has outperformed International SCV over the last 20 years even though the International version outperformed the International Market.
Given how the US has outperformed ex-US, wouldn’t it be better to just abandon ex-US stocks entirely? Current US valuations and the principle of diversification suggest not.
You said on the other thread that you overweight the recent past. I’m genuinely intrigued as to why. Is it because you’re a really engaged, nimble active investor who backs their ability to spot opportunities as they arise and move on when they dry up?
I wonder how you integrate cognitive effects like recency bias and the availability bias into your thinking?
Thanks ever so much for the reply @ermine.
Well I do have huge respect for mean reversion per se, and anchoring / recency bias are huge issues for sure, but…
I think that something is up in the market’s structure.
It’s a hunch.
I know that sounds (perhaps is) feeble, but there it is.
We’ve had so many booms and busts before, but in recent years the larger caps seems to go down less and 5hen to recover (sometimes much) faster.
Is it just my imagination (?) or, if real, then is it just a case of QE sugar stimulus after Covid in 2020-21, Chat GPT euphoria in 2022-23, and the TACO relief rally this year when tariffs were paused?
Maybe.
But, thinking back to 1987 (the storm and the crash), to 1994 (Mexican woes), to 1997 (Asian Currency Crisis), to 1998 (Russian default), to 2000-2002 (the 80% fall Nasdaq .com crash, God that one was brutal), to the 2007-2009 GFC (SPY down 55%, Nasdaq crushed, not back to ATH until 2013) etc; well it seems to me that there’s evermore a floor and trampoline in the US mega cap price action – i.e. compared to the earlier past – even though the news’ flow is arguably worse, and the risks to fundamentals maybe more significant still, in recent years.
Given that human psychology hasn’t changed much in thousands of years, the only ‘culprit’ I can finger is the possibility of a structural change being progressively caused by indexing (the price insensitive buyer, creating a relentless bid).
Could easily be wrong here. It’s just a guess.
I don’t as such exclude the earlier past. It is relevant, to a degree.
But what happened in 1935, say, is less relevant, all being equal, to prices today than what happened 6 months’ ago. So there’s a discount there.
1935 is surely less relevant to 2025 than 2024 but it doesn’t then follow that the past 125 years worth of returns is less relevant than, say, the past 10. Not because the world hasn’t changed but because the longer timeframe contains more information about the range of potential interaction between business cycles, economic conditions, geopolitics and asset prices.
For example, during the Global Financial Crisis, Bernanke drew upon the lessons of the Great Depression to help formulate a response, because the Depression was the best analogy for the contemporary crisis – despite occuring 80 years earlier.
I do understand your concern about changing market structure. I do think we can identify a longer list of candidates than indexing – though it must be having some effect now. Much less so 15-20 years ago. What that effect is, how it interacts with other forces, and whether that’s grounds for projecting recent trends further into the future… I’m doubtful. I’m more inclined to play the percentages.
Agree with you that 125 years’ of data beats 10 every time, even if the 10 years in question is the last 10 years.
And things that happened long ago do still form part of the evidence upon which to base decisions today.
But, whilst (channelling Edwin Lefevre/Jesse Livermore in Reminisences of a Stock Operator) “there is nothing new in Wall St…there can’t be.. speculation is as old as the hills..whatever happens in the ..market today has happened before and will happen again”; it’s equally true that (mangling Giuseppe di Lampedusa in The Leopard) that things must change to stay the same. Or as the Greeks put it, you can never step in exactly the same river twice.
In many ways the market today is not that of 125 years ago, even though there are some continuities – e.g. (IIRC) from 1900 to 1950 miners made up around 10% of the US market cap (less in the Depression, more just after WW2), but now it’s at an all time low of less than 1%, and SV didn’t exist until the 1950s. The industries of the future will not be the same as those of the distant past, even as some survive from now into the future.
So, caution is needed extrapolating from too long ago, even though the data is what it is, and should be acknowledged and respected however far back it goes.
On the market structure, off course strong tech earnings etc are a candidate, but it’s less a current epiphenomenon issue, and more a concern from first principles.
There’s been two major tech melt ups post WW2 – Nifty Fifty and Dot com (there was also the radio craze in the 1920s).
In neither was indexing a thing.
Had it been, how might things have panned out differently?
Never before has there been a major ‘forced’ buyer in the form of large presence index trackers with a mandate to deploy inflows into the market at existing cap weights regardless of fundamentals.
I don’t think that’s necessarily a good or a bad thing (and I use trackers extensively myself and love the cost and simplicity); but it is definitely a thing.
It’s hard to believe that as passive share in the S&P 500 goes well above the 48%/52% (including closet indexers) now, that it won’t then have material effects, be they good or bad, but surely not indifferent.
I agree with all of the above
Perhaps the thing I’d add re: industrial and technological trends is that although the economy changes, past returns embed information about technological transition. From canal mania to railroad mania to the rise of the aeroplane industry. The exuberance before the Wall St Crash was in a sense the dotcom bubble of its day.
You mentioned earlier that human psychology hasn’t changed. That’s an important observation. Most especially, I think, in reference to ourselves. The madness of crowds hasn’t disappeared but as Feynman said, “The first principle is that you must not fool yourself—and you are the easiest person to fool.”
One thing that really puzzles me is that SCV, Value and Small caps are meant to lead the recovery but in October 2022 and April 2020 that broke down and it was Large Growth (albeit US LG) that lead the recovery.
It’s perfectly normal for LG to take over leadership from Value etc as a bull market takes hold, but, usually, the relief that things are not economically getting worse at an accelerating rate most immediately benefits the stocks most exposed to economic uncertainty, interest rates, inflation and consumer retrenchment because they lack the cash reserves/access to cheap debt and pricing power of LG stocks.
Maybe it’s a fluke, but it was a notable departure from past crashes/recoveries and could, circumstantially, fit a structural change hypothesis/narrative.