UIVM's Struggle to Balance Value, Momentum, and Low-Volatility: A Factor Exposure Analysis

The VictoryShares International Value Momentum ETF (UIVM) was conceived as a hybrid strategy to harness the power of value and momentum factors while mitigating risk through low-volatility weighting. However, its performance over the past five years has revealed a complex interplay of structural challenges, market dynamics, and factor misalignment. This analysis delves into UIVM's factor exposure, its alignment with stated objectives, and the root causes of its underperformance, drawing on empirical data, peer comparisons, and academic insights.

UIVM's Factor Exposure and Strategy Design

UIVM's investment thesis centers on blending value and momentum factors in non-U.S. developed markets, with a volatility-weighted index designed to reduce risk exposure. The ETF's portfolio, comprising 193–241 stocks, emphasizes large and mid-cap equities and maintains a dividend yield of 3.56%. Academically, low-volatility strategies have historically generated annualized premiums of up to 6.4% and improved Sharpe ratios, particularly when combined with momentum. However, UIVM's beta of 0.83 and 200-day volatility of 11.77% suggest a moderate risk profile, which contrasts with the aggressive momentum-driven strategies that often dominate during bull markets.

A critical issue emerges in the ETF's regional allocation. While value and momentum strategies have shown robust performance in UIVM's international diversification, including significant exposure to Japan, Canada, and Germany, may dilute the effectiveness of its momentum tilt in markets where value has historically prevailed. This misalignment underscores the challenge of applying a one-size-fits-all factor strategy across geographies with divergent economic cycles and investor behaviors.

Peer Comparisons and Competitive Landscape

UIVM faces stiff competition from peers like the Fidelity International Value Factor ETF (FIVA) and the JPMorgan Diversified Return International Equity ETF (JPIN). FIVA, with a 0.39% expense ratio, focuses narrowly on value factors, while JPIN incorporates low volatility, momentum, size, and value according to ETF analysis. Despite UIVM's higher Sharpe ratio (2.44 vs. FIVA's 2.06), its year-to-date return of 37.03% as of October 2025 lags behind FIVA's 39.85% in 6-month returns. This discrepancy suggests that UIVM's dual emphasis on value and momentum may not consistently outperform single-factor strategies in volatile environments.

JPIN's inclusion of size and low-volatility factors further complicates UIVM's positioning. While UIVM's volatility-weighted approach aims to reduce risk, JPIN's broader factor integration may offer superior risk-adjusted returns in markets where small-cap and low-volatility stocks thrive. The high correlation (0.90) between UIVM and FIVA also raises questions about the distinctiveness of UIVM's strategy, as both ETFs exhibit similar volatility profiles despite differing factor tilts according to portfolio analysis.

Historical Performance and Underperformance Drivers

From 2020 to 2025, UIVM's returns have been mixed. It posted a 0.75% gain in 2020, a -13.29% loss in 2022, and a 16.79% rebound in 2023. This volatility reflects the inherent challenges of balancing value and momentum, which often exhibit divergent performance cycles. For instance, momentum strategies faltered in 2025 due to regime shifts and choppy market leadership, while value factors gained traction in international markets. UIVM's reliance on momentum during these periods likely exacerbated its underperformance.

Academic research further complicates the picture. A 2020 study on volatility interdependencies found that the effectiveness of value and momentum strategies varies significantly during economic and geopolitical shocks. UIVM's 2022 drawdown of -9.09% aligns with this finding, as global uncertainties-such as tariff announcements and trade policy shifts-disrupted momentum-driven trends. Meanwhile, low-volatility strategies, which prioritize stable returns, outperformed during these corrections, suggesting that UIVM's volatility-weighted index may not fully capitalize on defensive market conditions.

The underperformance of UIVM and similar factor ETFs since 2020 can be attributed to broader structural shifts. First, the proliferation of factor-based strategies has led to market saturation, reducing the availability of mispriced assets and diluting traditional factor premiums. Second, macroeconomic uncertainties-such as U.S. trade policy volatility and European stimulus measures-have created divergent regional performance, complicating the effectiveness of globally diversified strategies like UIVM according to market analysis.

Moreover, the 2025 momentum slump highlights the cyclical nature of factor performance. Momentum strategies, which thrive on sustained trends, struggled as market leadership shifted rapidly between sectors and regions. UIVM's exposure to high-beta stocks within its momentum component likely amplified losses during these reversals, undermining its low-volatility objective.

Conclusion

UIVM's struggle to harmonize value, momentum, and low-volatility factors reflects the inherent complexities of multi-factor investing. While its volatility-weighted approach offers defensive benefits, its reliance on momentum during volatile periods and regional misalignments have contributed to underperformance. Peer comparisons and academic insights suggest that a more nuanced integration of factors-such as JPIN's inclusion of size and low-volatility-may yield superior risk-adjusted returns. For investors, UIVM serves as a cautionary tale: factor strategies require dynamic adaptation to macroeconomic cycles and regional idiosyncrasies to remain effective.