Though the U.S. market is hovering at lofty levels on hopes of a few more months of cheap money flows, the euphoria may not last long. The economy is soft at present but is well on its way to recovery which might lead the Fed to take the rate hike decision this year. The Fed also recently pointed to the slight over-valuation in the U.S. stocks. This scenario makes the launch of Diamond Hill Valuation-Weighted (DHVW) well timed. The fund hit the market on May 12, 2015.

DHVW in Focus

This fund provides exposure to the 498 largest U.S. equities measured by intrinsic value capitalization. The fund meets its objective by tracking the Diamond Hill Valuation-Weighted 500 index.

The intrinsic value is computed on criteria including normalized earnings, earnings growth, projected dividend payout over the next five years and estimated tangible book value, per the issuer.

The ETF is widely diversified across components as apart from Apple no single security holds more than 1.9% of total assets. Apple is the top holding of the fund with about 4.5% allocation.

However, one-fifth of the portfolio is dominated by technology while financials, consumer discretionary, health care and industrials also receive double-digit exposure. DHVW is a large cap centric fund. The fund charges 10 bps in net fees per year from investors.

How Could it Fit in a Portfolio?

The fund could be an intriguing option for investors looking for value plays in the U.S. market. In fact, value investing has become essential for investors, with the global economy exhibiting a volatile trend lately (read: Hedge Your Portfolio with Low Volatility ETFs).  

Most developed economies are soft at present and thriving on easy money policies. Though the U.S. economic improvement has been assuring, the path of its recovery is not free from odds. The economy started 2015 on a weak note with a slew of offhand readings. Muted Q1 corporate earnings also raise apprehensions about corporate well-being. In such a scenario, value plays can soothe the nerves of edgy investors. This will help investors wait out volatility in the market.

Can it Succeed?

The road ahead may not be smooth for the newly launched fund as the space is teeming with competitors.iShares Russell 1000 Value ETF (IWD - ETF report) dominates the large-cap value equities space with assets worth $26.4 billion. The fund charges 21 basis points as fees.

There are several other quality and value ETFs in the U.S. equities space which can pose threats to the new-entrant. ValueShares U.S. Quantitative Value ETF (QVAL),Large Cap Value AlphaDEX Fund (FTA), MSCI USA Value Factor ETF (VLUE -ETF report) and S&P 500 Pure Value ETF (RPV) are to name a few (read: Buy Cheap, High-Quality, Winning Stocks via These ETFs).

However, investors should note that DHVW is cheaper than most of the well-known funds in this space. So, to amass investors’ money in this extremely crowded area, DHVW should endorse this key feature (read: Two Actively Managed ETFs Worth the Cost).