2026 is proving that value is alive and well, but certain value-focused ETFs have been standout performers relative to their factor peers. Such is the case with the iShares MSCI USA Value Factor ETF (VLUE), which is up over 40% for the year. It’s easily outpacing its value sibling, the iShares S&P 500 Value ETF (IVE) — proving that its enhanced methodology can outperform a simple market-cap weighted approach.

Key Takeaways:

  • VLUE is outperforming standard benchmarks in 2026 with a year-to-date gain over 40%. This demonstrates how systematic multi-metric screening can avoid classic value traps and outperform traditional market-cap-weighted strategies like IVE.
  • VLUE achieves its distinct factor tilt through a highly concentrated 152-holding portfolio. It allocates 42.5% of total capital to its top 10 positions — led by a 19% weight in Micron Technology. This results in a 36.2% tech allocation that nearly doubles IVE’s sector footprint.
  • Featuring a competitive 0.15% expense ratio, VLUE delivers enhanced factor exposure with passive ETF tax efficiency. The fund has distributed zero capital gains since its 2013 inception compared to the 8% average annual distribution typical of active large-cap value mutual funds.

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Inside VLUE’s Value Index

Designed for investors seeking enhanced long-term returns by targeting large-cap stocks priced at a fundamental discount, VLUE is built around systematic, factor-driven precision. It all begins with VLUE tracking the MSCI USA Enhanced Value Index, which draws from a selection universe of large- and mid-cap U.S. equities. Its prime differentiator is that the Index methodology goes beyond basic fundamental valuation metrics.

To avoid classic value traps, the index screens holdings using a rigorous composite of three fundamental valuation metrics. First and foremost, a low price-to-book value ratio identifies deeply undervalued companies relative to their balance sheet assets. Next, the low forward price-to-earnings metric isolates companies trading at attractive valuations based on their near-term earning power. Lastly, the low enterprise value-to-operating cash flow screens for companies exhibiting operational profitability while systematically reducing exposure to those that are highly levered. In the end, this multifaceted screening approach identifies fundamentally sound businesses while reducing exposure to over-leveraged risk.

Portfolio Holdings and Concentration Analysis

A direct comparison of portfolio structures for VLUE and IVE further highlights why the former achieves more targeted factor exposure than standard value benchmarks. Maintaining a highly concentrated approach with just 152 total holdings, VLUE places 42.5% of its capital in its top 10 positions. This results in an effective number of holdings of 21 and an effective holdings ratio of 0.14. Its largest conviction position, Micron Technology, accounts for an influential 19% of the fund, followed by Cisco Systems, Inc. at 4.66%. This underscores the fund’s heavy tech focus, with VLUE allocating 36.2% to the sector compared to IVE’s 18.7%. This is nearly double the exposure, which served as VLUE’s primary performance driver during tech’s rally.

In contrast, IVE offers a broader, less concentrated portfolio of 437 holdings that results in an effective number of 81 holdings and an effective holdings ratio of 0.19. Capital in IVE’s top 10 allocations represents only 23.62% of the fund, which is dominated by household mega-cap names such as Apple and Amazon. With only a 23% holdings overlap between the two funds, this comparison underscores how dramatically value ETF strategies can diverge.

Low Costs and Tax Efficiency

Punctuating VLUE’s strong performance is its low cost and tax efficiency. While active value managers often incur high expense burdens and taxable turnover, VLUE bridges the gap between active management insights and passive ETF efficiency. The fund carries a competitive expense ratio of just 0.15% to access its factor-screening techniques.

Furthermore, the fund offers structural tax advantages. Since its inception in April 2013, VLUE has never paid out a capital gains distribution. By comparison, active mutual funds in the Morningstar Large Cap Value category have averaged annual capital gains distributions of 8%.

By capturing undervalued companies using its enhanced index methodology, VLUE demonstrates how a rules-based factor strategy can outperform broader value benchmarks.

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