In what has been another record-breaking year for exchange traded funds (ETFs) inflows, smart beta funds are keeping up their end of the bargain. However, some of the leaders in terms of smart beta asset gathering may come as a surprise to investors.

Many of the largest smart beta ETFs are single-factor funds, meaning these funds are dedicated to an individual investment factor. Specifically, the largest single-factor ETFs are usually growth or value funds. Investors have been rewarded for embracing growth and momentum factors while the value factor is lagging. For example, the Russell Top 200 Growth Index is up more than 30% year-to-date while the S&P 500 Value Index is higher by just 13.6%.

Investors remain devoted to value, however, at least by way of ETFs.

"The Value factor has dominated smart beta ETF flows this year, despite its lackluster relative performance of 18% year-to-date, compared with 20.35% for the market and 26.90% for Quality,” according to Oppenheimer research. “Surprisingly, ETFs that harness and isolate Quality, which is characterized by low leverage and high return on equity, were actually in net outflows of $9 million for the month of November. While Value and Size are well established in the investing community, other factors are just starting to gather momentum in portfolio construction. Year-to-date smart beta flows demonstrate that the Quality factor may have more work to do to entice the passive investing community.”

Historical data suggest that value is a sound long-term bet, but in any given year, some factors are bound to outperform while others lag. Value's laggard status against the broader market is now lengthy. Since the start of the current bull market in U.S. stocks, the S&P 500 Value Index has offered only modest out-performance of the S&P 500 while being more volatile. For the six years ended 2016, the value index only topped the S&P 500 on an annual basis twice.

Of course, the idea of buying low and selling high applies to factors as well. Said another way, the best time to embrace the value factor is when it is offering, well, value, not after value stocks become overvalued. Fortunately for value investors, U.S. value stocks look inexpensive.

“For an investor with a medium- to long-term horizon, where starting valuations can affect expected returns, cheap factors may be preferable to expensive ones,” said the CFA Institute.

The JPMorgan U.S. Value Factor ETF (JVAL) is one of the newest entrants to the field of value of ETFs and one of the least expensive. With an annual expense ratio of 0.12%, JVAL is attractively priced relative to other large-cap smart beta products.

JVAL, which debuted in November, tracks the JP Morgan US Value Factor Index and holds 274 stocks. While financial services and energy are usually viewed as the premier destinations in today's U.S. equity market, JVAL allocates over 19% of its weight to the technology sector. Financials are the ETF's second-largest sector weight at 17%. JVAL has amassed $27.2 million in assets in just over a month on the market.

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