By Ian Salisbury

It's turning into a breakout year for iShares MSCI USA Value Factor ETF, a relatively obscure offering from iShares' library of hundreds of funds. While the fund has been a winner for investors, its success highlights a key pitfall for ETF investors.

The index fund, which trades under the ticker VLUE, promises to follow a classic value investing strategy. It will "buy stocks that are cheap relative to their fundamentals," according to its website.

The fund has returned 14.8% in 2026, good enough to earn the top spot among more than 160 large value ETFs in Morningstar's database. With $12 billion in assets VLUE is not a minnow, but neither is it one of the market's favorite options. In fact, Morningstar lists five other iShares value ETFs with more assets, including the $73 billion iShares Russell 1000 Value ETF and the $48 billion iShares S&P 500 Value ETF.

That said, VLUE's recent performance has been attracting a lot of attention. Investors have poured about a net $680 million into the fund this year, ranking it second among all total market value ETFs, according to FactSet. (By contrast, its two larger siblings have endured more than $3 billion in net outflows.)

VLUE's secret weapon? The fund has a big helping of tech and communications stocks. Together, these make up just over 50% of its portfolio, compared with 21% for the average large value fund, according to Morningstar.

Top holdings include Micron Technology (11% of the portfolio), Intel Corp. (6.7%), Cisco Systems (5.2%) and Applied Materials (3.9%).

VLUE is one of a set of several factor investing funds offered by iShares. Other options in the set target factors like low-volatility, quality, momentum and more.

While many traditional value funds tilt their holdings to sectors of the economy where stocks tend to boast low price-to-earnings ratios, such as utilities or energy, VLUE, which tracks something called the MSCI Enhanced Value Index, takes a different approach.

"The Underlying Index is designed to measure the performance of securities in the Parent Index that exhibit higher value characteristics relative to their peers within the corresponding Global Industry Classification Standard (GICS) sector," explains the prospectus. "Weights in the Underlying Index are next normalized so that sectors in the Underlying Index represent the same weight as in the Parent Index."

In other words, the fund aims to more or less match the sector-by-sector makeup of the U.S. stock market, but within those sectors skews toward stocks that look cheap relative to their industry peers.

Given than approach, it's not hard to see how a stock like Micron would end up as VLUE's top holding. The memory company's shares have rocketed 61% year to date. But as Barron's recently noted , its profits are forecast to grow so fast, it's trading at less than 6 times estimated 2026 earnings.

Fair is fair. The fund appears to do what it does on the tin. That still leaves the question of whether investors rushing to buy the ETF understand exactly what they are getting.

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 17, 2026 13:12 ET (17:12 GMT)

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