I've not read the Hale book myself (but it sounds interesting).

Are you sure IWFV captures whatever facet of "value" Hale is talking about? It tracks the "MSCI World Enhanced Value index", which if you look into what "Enhanced Value" means it means that despite the value tilt it tweaks the sectoral allocations so that they match the parent MSCI World index.

e.g MSCI World is 24% tech and so is IWFV (because "enhanced"). But instead of the tech "winners" in the top 3 of that - AAPT, MSFT, NVDA - you're holding top 3 CSCO, IBM, QCOM instead (all also tech). Now maybe this is what you want if those are indeed "good value" compared with overpriced winners. But you could equally argue that the "enhanced" index is unreasonably drawing you into an overheated sector and just buying the also overheated rubbish in it. CSCO being "good value for a tech company" might not be much of a value play if tech as a whole is lousy value.

If you look at MSCI's ordinary "unenhanced" value index
https://www.msci.com/doc...-4bec-b5ed-a7b56eca8e0d
that's only 9% tech and the top 3 are Broadcom (tech) and JPMorgan & Berkshire Hathaway (both financials).

Which one is the "true" value portfolio? (Or more to the point, what does Hale mean by "value" and is it closer to one index's approach or the other?)

Bit of an academic question as I think most of the ETF providers have gone with tracking the "enhanced value" index. But there are a few other more exotic ones I think.

Have to admit I do hold some IWVG myself (the distributing version of the ETF), from days when I was more enthusiastic about "smart beta". Thoroughly underwhelmed by it so far (IWFM & IWFQ have been the winners in that game) and yet.... altogether now... value's coming back any day now I tell you!

I recall on Bogleheads, it was either the Hale or Merriman Ultimate Buy-and-Hold Portfolio, the author had revised his opinion and admitted it hadn't worked. I've never liked these kind of portfolios – there's no logic behind them; no understanding of how to build a portfolio. They're just like naive active fund portfolios – betting on a couple of different horses to keep things interesting.

The whole theory around risk factors is questionable and inconsistent. Cliff Asness debunked the Size effect 10 years ago, when improved data on old stocks showed there was no long-term premium after all. It shows the very weak academic standards behind this stuff. We've got 3,000+ factors now because Fama & French set such a low bar. (6x more 'risk factors' than there are stocks in the S&P)

There are ways to use tilts strategically. I don't like using bonds in my own portfolios. So I might use a Quality tilt, or overweight Consumer Staples and Healthcare. Quality Dividend Growth is a good tilt away from more speculative parts of the market, without betting against large companies like Apple and Microsoft. But you still need to be building from a realistic framework. You need to know what the drag will likely be, if the correlations are useful .. People who've just swallowed FF Factor Theory, and want to add a few more betting slips ("You never know! You might get lucky! Have a nibble!") – these are not serious people. The best way to tilt away from market concentration is just to add an equal-weight index – it's effectively every factor (known and unknown). Whether that's a good idea or not is another matter.

On the Value front, Hale recommends either MSCI World Value or FTSE RAFI Developed 1000.

https://www.morningstar....shot.aspx?id=F00000ZMAT costs 0.25bps, so looks to be a good fit!

I don't think the MSCI World Enhanced Value index is at all what Hale intended. As you point out Tim, it says "The weight of each sector in this index is equated with the weight of that sector in the MSCI World". Which isn't really achieving the desires outcome.

The FTSE RAFI Developed 1000 on the other hand, states "Consequently the indices are less prone to excessive concentration arising from market fads, which can result in over-exposure to individual companies, sectors or countries".

The constituents of the latter look very different to the former, and it is this Hale suggests as a risk factor.

So I've made the decision to utilize the UBS fund that tracks the FTSE RAFI Developed 1000 index for the value tilts.

Good thread, Cm258. My thoughts / questions as follows:

Historically how much outperformance does this portfolio give over the equivalent weighted LifeStrategy or HSBC Global Strategy funds? Is it low single digits? If so, is the extra effort worth it?

With the components involved and some of the small percentages held, you could find yourself veering off course every quarter. That would make rebalancing a little tricky. When and how would you rebalance? Annual alignment through sales or top up in underperforming holdings each month with new money?

The relatively new Blackrock Lifepath Target Date Funds (this is the 2030 fund - 56.5% equity / 43.5% FI) look interesting as they hold quite a few of the Hale components such as:

13.87% iShares Overseas Government Bond Index Fund UK
10.15% iShares UK Gilts All Stocks Index Fund UK
6.48% iShares Up to 10 Years Index Linked Gilt Index Fund UK
4.72% iShares MSCI World Small Cap ESG Enhanced UCITS ETF

Had to dig into the annual report to find the breakdown of holdings. But for me there’s too much ESG nonsense stuff in there. Nonsense in the sense of how ESG is implemented by Blackrock rather than the concept of important stuff like good business governance.

And the same for the 80/20 implementation of the portfolio: