Market style shifts to the value sector. BlackRock's factor rotation ETF (DYNF.US) underperformed and failed to significantly outperform the market.

Driven by the idea that it can outperform the broader market by capturing shifts in market style rotation, BlackRock’s iShares U.S. Equity Factor Rotation Active ETF (DYNF.US) has attracted a large number of investors in recent years. However, as market styles are shifting rapidly right now, the performance of this fund—which should have been well-positioned—looks rather average.

The ETF’s core strategy is to dynamically adjust its portfolio and rotate among different “factors,” such as growth, value, and quality, to seize opportunities created by changes in market sentiment. The current market environment appears to be an ideal stage for this approach. After the AI theme drove technology stocks sharply higher over the past few years, investors have recently suddenly shifted toward traditional cyclical sectors such as energy, materials, and industrials.

But based on recent performance, the fund has not fully captured this style rotation. According to FactSet data, over the past six months, DYNF’s cumulative total return was 6.1%, slightly higher than the S&P 500’s gain of 5.7% over the same period, but far behind the iShares MSCI U.S. Value Factor ETF (VLUE.US), which successfully bet on the value style—up about 24% in the same period.

Although its short-term performance has not been particularly impressive, DYNF’s long-term results remain strong—one of the key reasons it has attracted substantial inflows. Data show that in 2025, the fund attracted about $14 billion in net inflows, making it the actively managed ETF with the highest inflows that year. Over the past five years, DYNF’s annualized return has been about 16%, higher than the S&P 500’s 14.3%, and also significantly above the roughly 12% average return for value stocks.

In terms of its holdings mix, the fund’s allocation to technology and communications is noticeably high. These two sectors together account for roughly 51% of the portfolio, versus about 43% in the S&P 500 index. By contrast, the fund allocates less to sectors such as energy, industrials, and materials.

More specifically, DYNF’s top three holdings right now are NVIDIA (NVDA.US), Apple (AAPL.US), and Microsoft (MSFT.US), and since 2026, the stock prices of these three tech giants have all been declining.

However, market participants also remind investors that they should not draw conclusions about a fund’s strategy based only on performance over a few weeks or months. In an interview with the media earlier, BlackRock said the fund does not rely on precisely predicting turning points in the market; instead, it gradually adjusts factor allocations by observing market trends over the next three to six months.

In an email BlackRock sent in January this year, it explained that as market-leading sectors start to rotate, the model gradually reduces the weights of industries and stocks facing unfavorable factors, while increasing allocations to areas with improving fundamentals and market conditions.

In other words, the strategy itself is a gradual adjustment process that takes time for results to show. Even though current performance has not yet fully caught up with changes in market style, over the long term, DYNF still has the potential to regain ground through subsequent adjustments.