VictoryShares US Small Mid Cap Value Momentum ETF is an attractive multifactor strategy that taps into a pair of well-vetted and complementary factors, diversifies risk well, and charges a low fee. 
The Nasdaq Victory US Small Mid Cap Value Momentum Index, which this fund tracks, selects stocks based on their combined value and momentum traits, but it’s primarily the value component that defines this portfolio. That’s partly because the index measures factors on a sector-relative basis, and it’s difficult to capture momentum that way. The fund’s inverse volatility weighting approach contributes as well, as it mechanically favors the portfolio’s cheaper, smaller stocks. So, the fund resides on the cheapest edge of the U.S. Small Blend Morningstar Category, and returns should correlate more closely with the value factor than momentum.
Still, momentum aids performance. It shields the fund from risky stocks whose recent tribulations may signal a longer-term slide. This should promote more defensive performance than the Russell 2000 Index, the fund’s category benchmark, and bolster its risk/reward profile.
Weighting stocks by the inverse of their volatility pulls the fund toward its sturdiest holdings and limits individual position sizes. It tallied nearly 300 holdings at the end of September 2023, the top 10 of which represented only 6.4% of the portfolio. The fund diversifies well at the sector-level too. Despite often trading at cheaper valuations than the Russell 2000, this portfolio avoids the sector biases that are common among value-leaning funds.
Like most funds that pursue momentum, this fund is prone to lofty turnover, but the associated transaction costs shouldn’t prove too consequential. This index screens out the least-liquid decile of the small-cap market, ensuring that portfolio holdings may be traded efficiently. Plus, the fund’s 0.25% expense ratio makes it a low-cost all-around offering.

Analyst Rating

Bolstered by two well-vetted factors.

Analyst

Ryan Jackson

NRG Energy

Encompass Health

CACI

Reinsurance Group of America

Old Republic International

SYNNEX

MGIC Investment

Essent Group

Pinnacle West Capital

Air Lease

Sound exposure to the value and momentum factors should drive this fund ahead of the Russell 2000 while its inverse-volatility weighting approach keeps risk in check. Value slumps can weigh on performance, but the fund stands to come out on top over the long term.

Above Average

Process

Victory Capital boasts a lean lineup of index-tracking funds managed by a fairly new team. Named managers Lance Humphrey and Mannik Dhillon have the savvy and capabilities to effectively track the index but lack the resources and specialization of larger competitors. The fund earns an Average People Pillar rating.
State Street’s index portfolio management team subadvised this fund until June 2019, when Victory Capital brought management in-house following their acquisition of USAA’s asset management business. Dhillon was named manager when the fund changed hands, but Humphrey has been there since its genesis. He helped develop the benchmark index and has managed the fund since its inception. His proximity to the strategy can aid index-tracking, especially around rebalances.
Humphrey and Dhillon oversee a portfolio implementation team that handles day-to-day operations. This group leverages an array of platforms to anticipate index changes, handle corporate actions, and monitor risk. They construct trades and send them to Victory’s Cleveland-based trading desk for execution.
Victory evaluates index portfolio managers’ performance with a holistic rubric that aligns their interests with investors’. Criteria include each fund’s benchmark-relative tracking difference and contributions to process improvements. The management team is subject to independent risk oversight.

Average

People

In April 2024, Victory Capital and Amundi announced plans to establish a long-term partnership. The deal is expected to close by the end of 2024, pending regulatory approval, and involves Amundi taking a 26% ownership stake (and 5% voting rights) in Victory Capital. In exchange, Amundi US (which operates under the Pioneer brand) will become the 12th franchise under Victory’s sprawling umbrella. Both firms will also enter into 15-year reciprocal distribution agreements. If the deal closes, Amundi US will become by far Victory’s largest franchise: As of March 2024, Amundi US had USD 104 billion in assets under management, while Victory had USD 170 billion.

Victory runs a multiaffiliate model in which it centralizes operations while giving franchises investment autonomy. While the deal implies some operational synergies, Victory has a long history of being hands-off with affiliates. Still, Victory’s roster of investment teams runs the gamut, with bright spots like Sycamore Capital and Trivalent Investments being offset by questions elsewhere like Victory Income Investors (formerly USAA Investments) and Victory Capital Solutions. The Amundi-Victory deal warrants monitoring, but the Average Parent rating now remains intact.

In other news, longtime private equity backer Reverence Capital Partners sold its stake in Victory in 2023, though fellow private equity investor Crestview Partners remains.

Parent

VictoryShares US Small Mid Cap Value Momentum ETF 

USVM tracks an index of small- and mid-cap US stocks that are selected by equal parts value and momentum, and weighted by volatility.

VictoryShares US Small Mid Cap Value Momentum ETF (USVM) implements a strategy combining valuation ratios and momentum indicators. The ETF is well-diversified across sectors and holdings, with attractive valuation metrics. USVM has slightly outperformed the Russell 2000 since inception, but recent performance is average compared to other small cap value funds.

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SAN ANTONIO--(BUSINESS WIRE)--Victory Portfolios II today announced plans to transfer the listing of six ETFs from NYSE to Nasdaq on or around November 1, 2022.

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Data on the rotation between small-cap growth and value stocks goes back decades. Looking back over 40 years, small value beat small growth about two-thirds of the time.

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ETF Trends CEO Tom Lydon discussed the VictoryShares USAA MSCI USA Small Cap Value Momentum ETF (USVM) on this week's “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show. The fund seeks to provide investment results that closely correspond, before fees and expenses, to the MSCI USA Small Cap Select Value Momentum [.

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Small-cap stocks and ETFs have been torched along with their large-cap peers during the recent bout of market volatility, but investors should ignore smaller stocks as a possible leadership when the coronavirus issue is contained. An avenue for investors to position for a small-cap rebound is by putting factors to use and the VictoryShares MSCI [.

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Momentum—once it picks up, it can be difficult to stop and while the debate in the capital markets is whether value can sustain its lead over growth, investors can’t forget about the momentum factor, especially if events like a U.S.-China trade deal can spark a year-end rally.

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News for VictoryShares US Small Mid Cap Value Momentum ETF ETF (USVM)