Growth ETFs: Performance & Factor Exposures

Neither performance nor factor exposures are desirable.

February 2023. Reading Time: 10 Minutes. Author: Nicolas Rabener.


  • Growth ETFs are not very differentiated, despite growth having various interpretations
  • 34 out of 40 growth ETFs underperformed the stock market over the last 3 years
  • Nor was the long-term performance attractive


Factors like value or momentum are also called stock market anomalies as there should not be any repeatable investing process that allows investors to harvest excess returns given efficient markets. Yet, factor investing is backed by decades of theoretical and practical research.

However, there are only a handful of factors vindicated by research and growth is not one of them. In fact, most academics view growth stocks as expensive stocks, so such a factor should be associated with negative excess returns (read What Are Growth Stocks?). Oddly enough, investors have allocated more than $300 billion to growth ETFs, which can also be regarded as an anomaly as it basically requires betting against all the research. 

It seems there might be good and bad anomalies in financial markets. So, how bad was it to invest in growth ETF?

In this article, we will explore the performance and factor exposures of growth ETFs.


We focus on growth ETFs traded in the US stock market with a track record of more than three years, which is a universe of 40 products. These collectively manage $304 billion and charge an average management fee of 0.26%. The cheapest ones are available at a mere 4 basis points, while the most expensive costs 77 basis points.

There are an additional 45 ETFs with a growth focus that have been launched recently and have a track record of less than three years, but these cumulatively manage less than $5 billion of assets. Most of these are actively managed strategies and are essentially mutual fund conversions.

We can highlight the interest in growth ETFs by contrasting the evolution of the assets under management of the Vanguard Growth Index Fund (VUG) and the Vanguard Value Index Fund (VTV), which are the two largest ETFs of their smart beta categories. The former currently manages $68 billion, compared to $99 billi