With the halfway point of 2017 almost here, it is fair to say that the value factor has been a laggard among the major investment factors. The iShares Edge MSCI USA Value Factor ETF (VLUE) and the iShares S&P 500 Value ETF (IVE) are each up about 5 percent.

Some other exchange-traded funds (ETFs) dedicated to the value factor are performing in line with returns offered by VLUE and IVE, while few are performing noticeably better. Value has been lagging for a variety of reasons, including increased risk appetite that has investors favoring higher-beta, cyclical sectors. Additionally, some of the sectors that are viewed as value plays are struggling. For example, energy is a hallmark in some value ETFs, but the sector is the worst performing group in the S&P 500 this year. (See also: Energy Sector in Hot Water, Defaults Keep Rising.)

IVE, which tracks the S&P 500 Value Index, allocates 10.7 percent of its weight to the energy sector. VLUE, which follows the MSCI USA Enhanced Value Index, devotes 6.1 percent of its weight to energy stocks. VLUE's index "measures the performance of U.S. large- and mid-capitalization stocks with value characteristics and relatively lower valuations, before fees and expenses," according to iShares.

In addition to sagging energy equities, there are other risks to the value factor. "We see an unexpected economic regime change as the major risk to value," said BlackRock, Inc. (BLK) in a note. "Lower growth and inflation would weaken the fundamental outlook for cheaper stocks. Factor tilting, rather than short-term in-and-out timing, can help balance opportunities with the aim to improve returns without disrupting the long-term benefits of a diversified factor portfolio, in our view." (See also: Value Investing.)

Financial services stocks have also been hindering value ETFs. The sector is another pillar of traditional value ETFs, as highlighted by IVE's 26.5 percent weight to the group. That is more than double IVE's second largest sector allocation, which is healthcare. VLUE's 14 percent weight to financials is comparatively light, but it is enough to be a hindrance at a time when financials are the second worst sector year to date behind only energy.

VLUE and IVE express value in different ways. For example, VLUE's largest sector weight is technology at 22 percent, or more than triple the weight IVE devotes to that sector. VLUE's tech holdings are primarily mature, mega-cap names such as Apple Inc. (AAPL).

"Finally, the economic regime is the biggest driver of factor performance, although combining this with other indicators such as relative strength, valuation and dispersion can produce better results, we find," adds BlackRock. (See also: Value Investing Strategies in a Volatile Market.)

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