iShares Russell 2000 Value Index (ETF) (IWN)

iShares Russell 2000 Value Index Fund primarily invest in the small capitalization value sector of the U.S equity markets and is a subset of the Russell 2000 index, accounting for approximately 50% of the same. The selection criteria would be in the form of stocks that have low price to book ratios and lower forecasted growth. With total net assets worth $4.5 billion, it has a price to book multiple of 2.25.


The past performance of the fund has been good with average annualized return of 15.14% for the past five years. It has generated impressive returns managing to out perform majority of its competitors. It owes its success to the significant stake of about 10% in Real Estate Investment Trust. More than one third of the corpus is invested in the financial services, sending mixed signals with real estate prices cooling on one side and interest rates reviving on the other. With less exposure to the traditional banking, investment banking, asset management and brokerage business and more exposure on real estate makes the funds return uncertain. Consumer discretionary, materials and processing and utilities account for 17.5%, 9.67 and 7.03 respectively.


Outlook for the software and hard sub sector on the technology front looks neutral with expectations of reduced IT spending and increasing competition leading to pricing pressure. Exposure to healthcare and energy really adds confidence to the fund but would not make a big impact with its low weightage. The defensive nature of the consumer staples would help in times of slowing economy. The expense ratio for the fund is marginally higher due to reconstitution cost. Further it is more volatile that most of its traditional small cap peers and may fall short of expectations in 2007.