The IWX ETF: Why Large-Cap Value Exposure Falls Short

In the post-pandemic investment landscape, the value factor has struggled to reclaim its historical appeal. For investors seeking exposure to value stocks, the iShares Russell 1000 Value ETF (IWX) has emerged as a key player, yet its performance relative to broader market benchmarks like the SPDR S&P 500 ETF (SPY) and the iShares S&P 500 Value ETF (IVE) raises critical questions. This analysis delves into the underperformance of IWX and its implications for value-focused strategies.

Performance Metrics: A Tale of Two Value ETFs

Data from the past five years (2020–2024) reveals stark contrasts between IWX, SPY, and IVE. According to data, SPY has delivered an annualized return of 14.17% over the past decade, while IVE-a large-cap value ETF-lagged with 11.03%. IWX, which targets mid-to-large-cap value stocks, shows a mixed record: it outperformed SPY in year-to-date (YTD) returns (14.02% vs. 12.79%) according to analysis, yet underperformed over the past 12 months (6.95% vs. 14.56%) as reported.

Risk-adjusted metrics further highlight the gap. SPY's Sharpe ratio of 0.77 dwarfs IVE's 0.37 according to analysis, while IWX's 0.61 places it between the two according to data. Maximum drawdowns also tell a story: IVE's -61.32% during the 2020 crash according to reports contrasts with IWX's -35.76% according to analysis, though both pale against SPY's -55.19% according to data. These figures underscore the volatility inherent in value strategies, particularly in smaller-cap segments.

Why Value Struggles: Market Dynamics and Sector Exposure

The underperformance of IWX and IVE reflects broader market trends. The S&P 500's dominance by large-cap growth stocks-led by tech giants like NVIDIA and Apple-has skewed returns in favor of SPY. In 2020–2024, SPY's YTD return of 15.65% according to analysis was driven by these megacaps, which constitute a smaller portion of value-focused ETFs. IVE and IWX, by contrast, are weighted toward sectors like industrials and financials, which have faced headwinds from inflation and interest rate hikes.

Moreover, the value factor's historical outperformance has been inconsistent in recent cycles. As noted in a 2025 report by Portfolioslab, value stocks often underperform during periods of low volatility and high liquidity according to research. The post-2020 environment, characterized by rapid monetary easing and speculative trading in growth assets, has exacerbated this trend.

Investor Strategy: Reallocating for Resilience

For value investors, the data suggests a need for recalibration. While IWX's exposure to mid-cap value stocks offers diversification benefits, its volatility and underperformance in key periods may not justify the risk. Investors might consider blending value strategies with momentum or quality factors to mitigate downside risks. For instance, SPYV (an S&P 500 Value ETF) has shown superior long-term returns compared to IWX according to analysis, albeit with higher drawdowns.

Additionally, tactical allocations to sectors with stronger earnings visibility-such as healthcare or consumer staples-could enhance value portfolios. As one analyst observed, "The key to value investing in today's market is not just picking cheap stocks, but identifying those with durable cash flows and competitive advantages" according to insights.

Conclusion

The IWX ETF, like its large-cap counterparts, has struggled to outperform the broader market in recent years. While value investing remains a cornerstone of diversified portfolios, its current underperformance underscores the need for strategic adjustments. Investors should weigh the risks of value exposure against the potential rewards, particularly in an environment where growth stocks continue to dominate. As the market evolves, a nuanced approach that blends value with other factors may offer a more resilient path forward.