VictoryShares Emerging Markets Value Momentum ETF (UEVM)

The VictoryShares Emerging Markets Value Momentum ETF — ticker UEVM — is a rules-based equity fund that selects stocks from emerging-market economies using a combination of value and momentum criteria. It aims to capture exposure to developing-world growth while applying stock-picking discipline through quantitative filters that favour both cheap valuations and positive price trends.

The value-momentum combination

UEVM combines two distinct stock-selection signals. The value component looks for companies trading below historical or peer valuations — stocks where the price-to-earnings ratio, price-to-book, or other measures suggest the market has underpriced the company relative to its earnings potential. Cheap stocks, in principle, offer higher upside and a margin of safety.

The momentum component favours stocks with positive price trends. Rather than buying stocks simply because they are cheap, momentum screens add the criterion that the stock’s price should already be rising — a sign that the market is beginning to wake up to its value. Combining these two factors is meant to avoid value traps — the cheap stocks that stay cheap because they are genuinely weak — while capturing the strength that emerges when value becomes visible.

The emerging-market universe

UEVM draws its stock universe from the publicly traded companies of emerging-market economies — primarily China, India, Brazil, South Africa, Mexico, Taiwan, and other developing nations. Emerging-market stocks are typically smaller, less analysed, and more volatile than developed-market equivalents, which creates both opportunity and risk. They offer potential growth at prices lower than their developed-market counterparts, but they also carry currency risk, lower liquidity in individual stocks, and exposure to political and economic instability in their home countries.

The fund typically holds 80 to 150 stocks across this universe, which is concentrated enough to be meaningfully different from a broad emerging-market index but diversified enough to avoid heavy single-stock risk.

How the selection works

VictoryShares publishes its methodology: stocks are scored on value metrics (valuation relative to earnings, book value, and sales), momentum metrics (relative strength and price trends), quality metrics (profitability and stability), and sometimes other factors. The highest-scoring stocks, within limits on sector and country concentration, are included. The portfolio is rebalanced periodically, typically quarterly, to refresh the value and momentum signals.

This is more active than a pure index fund but more mechanical than a traditional active manager with discretion. The rules are transparent and backtestable, which appeals to investors who want a systematic approach without the fees of a fully active strategy.

The opportunity and the risk

Emerging markets as a category have delivered strong long-term returns over many decades, driven by faster economic growth, rising productivity, and the expansion of their consumer classes. A value-and-momentum overlay is designed to harvest the returns that come from stock-picking within that opportunity set. By avoiding value traps and riding price momentum, the fund aims to outperform a simple emerging-market index.

The risk is that the factors do not persist in all markets or time periods. Emerging-market value stocks can remain cheap for years if sentiment sours on the region. Momentum, by its nature, is a recent-returns-based phenomenon; a momentum score offers no protection against crashes when sentiment reverses. In a major emerging-market sell-off, both value and momentum can amplify losses.

Currency movements also matter. UEVM’s holdings are quoted in local currencies — Indian rupees, Chinese yuan, Brazilian real — and the ETF’s dollar performance depends partly on whether those currencies strengthen or weaken. An emerging-market stock rally offset by currency depreciation may leave a US-dollar investor flat.

Costs and liquidity

The expense ratio is moderate for an active or semi-active fund, typically in the 0.6 to 0.8 per cent range, reflecting the cost of stock research, index maintenance, and the more-frequent rebalancing that factors require. Trading costs — the spread between bid and ask, plus market impact — are higher for an emerging-market fund than for a broad US equity fund, because individual emerging-market stocks are less liquid.

UEVM itself trades on NASDAQ with good volume and tight spreads; entering and exiting the fund is straightforward. But the underlying holdings in Vietnam or Brazil may be less liquid, which can mean tracking error in volatile markets as the fund struggles to rebalance quickly.

How to research UEVM

Studying UEVM starts with the fund fact sheet and prospectus, which lay out the value and momentum definitions, the screening rules, and the holdings. Comparing the current portfolio against a broad emerging-market index like MSCI Emerging Markets will show how different UEVM’s bets are. A high concentration in India versus low exposure to Russia, or an overweight in consumer stocks versus financials, signals how the value-and-momentum filters are playing out.

The second step is understanding the emerging-market opportunity itself — reading on India’s growth, China’s economic cycle, or Brazil’s inflation dynamics gives context for why stocks are trading at the valuations the fund is targeting. Finally, comparing UEVM’s recent performance against both its underlying universe and its own historical record provides a sense of whether the factors are currently working.

Investors should be aware that factor-based funds like UEVM can underperform for extended periods when the factors are out of favour; understanding the strategy and having a long-term horizon are essential.