Does anyone know what's going on with RZV?

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johndough
Posts: 17
Joined: Tue Dec 30, 2008 10:24 pm

Does anyone know what's going on with RZV?

Post by johndough » Mon Feb 03, 2020 9:47 pm

I'm surprised by its underperformance relative to other small value funds with strong value loadings. For example, it tracked VIOV very closely until ~Jan-16 but has had huge negative tracking error since then. Does anyone know what's driving the underperformance (even factor adjusted)? Do you think either it or the S&P SmallCap 600 Pure Value index is being exploited in some way?

HippoSir
Posts: 102
Joined: Tue Jul 03, 2018 2:56 pm

Re: Does anyone know what's going on with RZV?

Post by HippoSir » Mon Feb 03, 2020 9:55 pm

RZV has much higher factor loadings than VIOV. Small value has been getting crushed recently, so RZV is correspondingly getting crushed worse than VIOV.

Elysium
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Joined: Mon Apr 02, 2007 6:22 pm

Re: Does anyone know what's going on with RZV?

Post by Elysium » Mon Feb 03, 2020 11:00 pm

Energy sector.

HippoSir
Posts: 102
Joined: Tue Jul 03, 2018 2:56 pm

Re: Does anyone know what's going on with RZV?

Post by HippoSir » Mon Feb 03, 2020 11:43 pm

I was curious so I looked up actual #s (from Morningstar):

RZV:
Avg Market Cap 672.76 Mil
Price/Earnings 10.44
Price/Book 0.66
Price/Cash Flow 2.01

VIOV:
Avg Market Cap 1.45 Bil
Price/Earnings 14.35
Price/Book 1.22
Price/Cash Flow 4.66

The difference is actually even more significant than I thought. RZV is way smaller/more value-y.

"Small value" fund performance varies a lot depending on how strong a fund's exposures are.

AlohaJoe
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Location: Saigon, Vietnam

Re: Does anyone know what's going on with RZV?

Post by AlohaJoe » Tue Feb 04, 2020 12:16 am

johndough wrote:
Mon Feb 03, 2020 9:47 pm
it tracked VIOV very closely until ~Jan-16 but has had huge negative tracking error since then
It didn't track VIOV very closely.

Image

Every year except for 2016 they were over 5% apart, which is a massive difference. -8% instead of -2%. +45% instead of +39%.

It was just that by coincidence it more or less balanced out for 5 years.

Hallman
Posts: 122
Joined: Fri May 17, 2013 4:25 pm

Re: Does anyone know what's going on with RZV?

Post by Hallman » Tue Feb 04, 2020 4:09 pm

HippoSir wrote:
Mon Feb 03, 2020 11:43 pm
I was curious so I looked up actual #s (from Morningstar):

RZV:
Avg Market Cap 672.76 Mil
Price/Earnings 10.44
Price/Book 0.66
Price/Cash Flow 2.01

VIOV:
Avg Market Cap 1.45 Bil
Price/Earnings 14.35
Price/Book 1.22
Price/Cash Flow 4.66

The difference is actually even more significant than I thought. RZV is way smaller/more value-y.

"Small value" fund performance varies a lot depending on how strong a fund's exposures are.
I suspect the numbers above are the December 31st numbers. Morningstar just updated RZV after a pretty bad month:

RZV:
Avg Market Cap 590 Mil
Price/Earnings 9.12
Price/Book 0.60
Price/Cash Flow 1.83

:shock:

HippoSir
Posts: 102
Joined: Tue Jul 03, 2018 2:56 pm

Re: Does anyone know what's going on with RZV?

Post by HippoSir » Tue Feb 04, 2020 7:06 pm

Hallman wrote:
Tue Feb 04, 2020 4:09 pm
RZV:
Avg Market Cap 590 Mil
Price/Earnings 9.12
Price/Book 0.60
Price/Cash Flow 1.83

:shock:
That is amazing. For comparison, here's RSX (a Russia ETF):

Price/Earnings 7.34
Price/Book 1.09
Price/Cash Flow 4.03

Deep small cap value is at truly dire valuations compared to the rest of the market. Either this is going to mean revert and go to the moon, or we're in a new kind of market.

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andromeda2k12
Posts: 43
Joined: Sun Oct 13, 2019 10:22 pm

Re: Does anyone know what's going on with RZV?

Post by andromeda2k12 » Tue Feb 04, 2020 7:38 pm

HippoSir wrote:
Tue Feb 04, 2020 7:06 pm
Hallman wrote:
Tue Feb 04, 2020 4:09 pm
RZV:
Avg Market Cap 590 Mil
Price/Earnings 9.12
Price/Book 0.60
Price/Cash Flow 1.83

:shock:
That is amazing. For comparison, here's RSX (a Russia ETF):

Price/Earnings 7.34
Price/Book 1.09
Price/Cash Flow 4.03

Deep small cap value is at truly dire valuations compared to the rest of the market. Either this is going to mean revert and go to the moon, or we're in a new kind of market.
I’m not sure how good of an idea deep SCV is solely for the horrendous quality and momentum loadings. At what point do the negative loadings on other factors outweigh the positive value loading?

Hallman
Posts: 122
Joined: Fri May 17, 2013 4:25 pm

Re: Does anyone know what's going on with RZV?

Post by Hallman » Sat Feb 08, 2020 12:15 pm

RZV is a weird beast. I'm not sure it is a good representative for deep scv and factor regressions on a fund with as few stocks as RZV has, leaves a lot unexplained. Think about this: the aggregate value of all the holdings in RZV equates to less than the value of Starbucks.

Hallman
Posts: 122
Joined: Fri May 17, 2013 4:25 pm

Re: Does anyone know what's going on with RZV?

Post by Hallman » Wed Mar 18, 2020 12:42 am

Down about 43% since thread was made. Down almost 60% from peak. Cheap can get cheaper!

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