A sound investment process and strong management team underpin Vanguard S&P Mid-Cap 400 Value ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The equity team managing the passive product drives the strategy's Above Average People Pillar rating. The strategy is part of a first-rate parent that has a high lineup success ratio and overall affordable fees. These attributes support its High Parent Pillar rating.

Analyst Rating

Jabil

Equity LifeStyle Properties

Regal Rexnord Corp

Chesapeake Energy

Reinsurance Group of America

Unum

Fortune Brands Innovations Inc

XPO Logistics

Lear

Toll Brothers

The portfolio features smaller companies than most peers in the mid-cap value category. This fund’s average market cap was just $5.2 billion at 2022’s end, which is less than half the category average. Only the next 400 largest profitable companies in the United States are considered for parent index, after the S&P 500 Index collects the largest 500. As of January 2023, stocks qualifying for the S&P MidCap 400 Index had a market cap of between $4.6 billion and $12.7 billion. 
The fund’s broad reach minimizes stock-specific risk. The portfolio usually holds around 300 stocks, and only 8% of assets are concentrated in the fund's top 10 holdings, as of December 31, 2022. No one position claims more than 1% of the portfolio.
The portfolio’s sector composition looks a little different than its average peer due to its size and style orientation. For example, its energy allocation dwindled to less than 1% of the portfolio as names like EQT EQT and HF Sinclair DINO grew too large for the fund’s size mandate. The category's average allocation to that sector is 6%. This fund compensates for the deficit with greater allocations to consumer cyclical, real estate, and technology stocks.
The portfolio remains a good representation of the mid-cap value category despite these sector differences. Most key value metrics are closely tied to the category average. Price/book, price/earnings, and price/sales ratios have all moved in lockstep with the average peer since the fund’s inception in 2000. Approximating the category average should help this fund turn its low fee into a distinct performance advantage.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a passively managed vehicle that tracks a particular index, Morningstar associates the Process Pillar rating assigned to that vehicle with the index concerned. Morningstar then maps the Process Pillar associated with a given index to any other uncovered passive strategies that track the same index. This ensures that the analyst’s view is leveraged whenever available and promotes consistency when analyzing passive vehicles associated with a given index.

Above Average

Process

Vanguard’s equity team is strong compared with others in the industry, resulting in an Above Average People Pillar rating. The fund takes a solo manager approach, with Kenny Narzikul as the only listed manager at the helm, who brings only zero year of portfolio management experience to the table. They manage a total of eight strategies, with a Gold asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha relative to the category median in aggregate. With only one manager listed on the strategy, the passive strategy is vulnerable to key-person risk. In fact, there has been recent turnover with Awais Khan leaving within the last five months. Even though it is a passive fund, constantly changing hands can still hinder the effectiveness of the investment process. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

The Vanguard Group retains a High Parent rating. 

Mutual ownership, low costs, and a direct-to-investor playbook have helped spur Vanguard's leadership within the United States. Client service missteps notwithstanding, Vanguard over the past decade has grown its market share of U.S. open-end and exchange-traded fund assets at about a 5% annualized clip. At that rate, Vanguard's portion of the U.S. industry will cross 50% around 2035.

True, some competitors can now match or even undercut Vanguard on fees for broad market exposure. But Vanguard's burgeoning advice business could help it keep or even extend that lead. Through Digital Advisor and Personal Advisor Services, Vanguard has built an increasingly compelling ecosystem of advice for investors with simple to complex needs.

Vanguard is also using its advice business to expand overseas, but that's a work in progress. Of Vanguard's USD 7.6 trillion in global assets under management in March 2023, non-U.S. investors owned less than 10%, a figure that has changed little in recent years. Strategic shifts in China and other markets account for the slow pace, including returning money to institutions that had been layering on fees. Vanguard hopes to recoup that money and more by focusing on individual investors and the advisors who serve them. Provided Vanguard sticks to its playbook, its advantages should translate into success abroad, too.

High

Parent

Vanguard S&P Mid-Cap 400 Value ETF

IVOV tracks an index of value-style securities from the Committee-selected S&P mid-cap 400.

The Fund seeks to track the performance of a benchmark index that measures  the investment return of mid-capitalization value stocks in the United States.

Launched on 09/09/2010, the Vanguard S&P Mid-Cap 400 Value ETF (IVOV) is a passively managed exchange traded fund designed to provide a broad exposure to the Mid Cap Value segment of the US equity market.

Should Vanguard S&P Mid-Cap 400 Value ETF (IVOV) Be on Your Investing Radar?

Vanguard S&P Mid-Cap 400 Value ETF implements a systematic strategy based on value and growth ratios. It is well-diversified across sectors and holdings. The underlying index has outperformed the S&P Mid-Cap 400 benchmark since 2000.

IVOV: A Well-Diversified Value ETF For Long-Term Investors

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While many Wall Street analysts were expecting a soft landing in the U.S. economy hurt by high inflation and rates, the latest view is that "rolling recession" is turning into "rolling expansion," per a top Wall Street economist, as quoted on MarketWatch.

Time for Mid-Cap Value ETFs to Capitalize on "Rolling Expansion"?

IVOV tracks the S&P Mid-Cap 400 Value Index. Valuation metrics are not much cheaper than in the parent index S&P 400.

IVOV: A Mid-Cap Value ETF By Vanguard

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Vanguard S&P Mid-Cap 400 ETF

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Vanguard S&P Small-Cap 600 ETF

Vanguard S&P Small-Cap 600 Value ETF

Plus, iShares added an emerging market bond ETF to its lineup at the end of the week.

Odds & Ends: 6 Vanguard ETFs to See Share Splits

VALLEY FORGE, Pa. , Feb. 22, 2023 /PRNewswire/ -- Vanguard today announced plans to execute forward share splits for six equity ETFs.

Vanguard Announces Share Splits for Six Equity ETFs

This mid-cap ETF hits a new 52-week high. Are more gains in store for this ETF?

Mid-Cap ETF (IVOV) Hits New 52-Week High

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Vanguard S&P 500 Growth ETF

Vanguard S&P 500 Value ETF

The style-box updates feature the iShares ETFs since for the mid-quarter updates, the performance data on the benchmarks is not available until the end of every month, and then reported after a day or two delay. In 2021, mid and small-cap value finally beat their growth brethren, but in large-cap, growth continues to be the king.

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Invesco S&P MidCap Momentum ETF

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Investors seeking to capitalize on the improving economic conditions but worried about the resurgence in the pandemic should consider mid-cap stocks in the basket form.

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AECOM

American Financial Group

East West Bancorp

First Horizon National

Jones Lang LaSalle

Kohl's

SPDR S&P Midcap 400 ETF Trust

Owens Corning

Omega Healthcare Investors

Reliance Steel & Aluminum

Reinsurnce Gr Amer Debentures 2016-15.06.56 Fixed/Floating Rate

Signature Bank

Steel Dynamics

Alleghany

IVOV strategy and facts. Comparing IVOV with my value model.

IVOV: Midcap Value ETF Review

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We highlight several reasons for outperformance of value investing, which refers to those stocks that trade below their intrinsic value.

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While large companies are normally known for stability and the smaller ones for growth, mid-caps offer the best of both worlds, simultaneously allowing growth and stability in a portfolio.

News for Vanguard S&P Mid-Cap 400 Value ETF ETF (IVOV)