What Survives: Ten Years of the Sustainable Value Strategy
In the second quarter of 2000, the eVestment database held 1,234 institutional U.S. equity products. By the first quarter of 2025, only a third of them were still reporting returns. Small-cap value had the best survival rate of any style, at 50%.1
Those figures come from a study WEDGE Capital Management published in July 2025. Our Sustainable Value Strategy isn’t in it: the study follows only products that existed in 2000, and we launched ten years ago. But the pattern it describes offers a useful lens for thinking about what a decade means in this business. Many strategies don’t make it that far.
Can Sustainable and Value Investing Work Together?
When we launched, pairing “sustainable” with “value” drew skeptical looks from both sides. Value investors assumed responsible investing meant paying up for a story. Sustainable investors assumed value meant owning whatever was cheap, regardless of how it got that way. We thought both camps were looking at the same question from opposite ends.
Durability: The Question Behind Our Three Pillars
That question is durability. What lets a business keep earning good returns on capital for a long time? Our Three Pillars (a superior business, superior management, and an attractive valuation) were built to answer it. The sustainability work sharpens the answer. A company that burns through its workforce, treats its community as an afterthought, or has a board that rubber-stamps management is carrying a risk the income statement doesn’t show yet. It usually shows eventually.
Low Turnover and Unanimous Buy Decisions
In practice, that means we seek to own profitable companies with sound balance sheets, bought at reasonable prices and run by people we’d trust with our own capital. It means low turnover. It means every purchase requires unanimous agreement from the investment team, and any one of us can say no. That rule has cost us a few ideas over ten years. It has saved us more.
Why Even the Best Managers Have Bad Stretches
The WEDGE study has a second finding that matters even more. You might expect the survivors to be the managers who never stumbled, but they weren’t. The survivors went through worse three- and five-year stretches against their benchmarks than the drop-outs had before closing. Even the top tenth of survivors trailed by around two percentage points a year over some three-year window. A rule that fired managers after a bad stretch would have fired every single one of them.2
Why Quality Investing Lags in Speculative Markets
Quality doesn’t always lead. There have been long periods over the past decade when the market paid more for promises than for profits. The pattern we’ve seen over our careers is that quality lags during speculative bursts and earns its keep when they end. We believe the same holds for companies that are run responsibly.
Long-Term Clients and Our B Corp Standard
None of this works without clients willing to take the long view. WEDGE’s conclusion was that the ability to sit through difficult stretches may be the key to long-term success.3 That’s as true for the people who own a strategy as for the people who run it. Many of our clients joined when combining sustainability and value was still an unfamiliar idea. Some have been with us since the first year. Their patience has let us keep doing the work the way we believe it should be done. Riverwater’s Certified B Corporation status comes from the same place: we wanted our own firm held to the standard we apply to the companies we own.
Ten Years In: The Questions Haven’t Changed
Ten years in, the strategy looks much like it did at the start. That’s intentional. The companies have changed. The questions we ask of each one haven’t.
As always, thank you for your trust and confidence. We look forward to the next ten.
Citations
- Christopher Lewis, “Investment Survivors: The Reality of Competition,” WEDGE Capital Management, July 2025, p. 3. Accessed September 29, 2026, source PDF. The study covers U.S. equity products in the eVestment database in Q2 2000, grouped into six Russell style categories.
- Christopher Lewis, “Investment Survivors: The Reality of Competition,” WEDGE Capital Management, July 2025, pp. 8–9 (Table III and accompanying discussion). Accessed September 29, 2026, source PDF. Relative returns are gross of fees and measured against style-appropriate Russell benchmarks.
- Christopher Lewis, “Investment Survivors: The Reality of Competition,” WEDGE Capital Management, July 2025, p. 9 (Concluding Remarks). Accessed September 29, 2026, source PDF.
Important Disclosures
This material is for informational purposes only and does not constitute investment advice or an offer to sell or a solicitation of an offer to buy any security. The views expressed reflect Riverwater Partners, LLC as of the date of publication and are subject to change without notice. Statements about how quality or responsibly run companies may perform over time reflect Riverwater’s beliefs and past observations, and there is no guarantee that any pattern will repeat. Past performance is not indicative of future results.
Risks of the Sustainable Value Strategy. All investments involve risk, including the possible loss of principal, and there is no assurance that the strategy will achieve its investment objective. The strategy invests in equity securities, which can decline in value due to market, economic, industry or company-specific factors. Its benchmark is the Russell 2500 Value Index, and its results may differ significantly from the benchmark, including trailing it for extended periods of several years or more. Specific risks include the following:
Small and mid-sized companies. Smaller companies tend to be more volatile, less liquid and less diversified than larger companies, may have limited publicly available information, and can be more sensitive to changing economic conditions and to the loss of key personnel. It may be difficult to buy or sell these securities at desired prices, particularly in stressed markets.
- Value investing. Value-oriented securities may remain undervalued for long periods, or may be inexpensive for good reason, and the value style can underperform other investment styles or the broader market. Riverwater’s judgments about business quality, management and valuation may prove incorrect.
- Concentration and process. The strategy generally holds a limited number of securities (currently 25 to 40), so the results of any single holding can have a larger effect on performance than in a more diversified portfolio. The strategy’s low turnover may mean that a declining position is held longer than it would be under a more active trading approach. Its requirement of unanimous investment team agreement for each purchase may cause the strategy to pass on investments that later perform well.
- Sustainability considerations. Incorporating environmental, social and governance factors may lead the strategy to avoid or sell securities that would otherwise appear attractive, and its results may differ from those of strategies that do not consider these factors. Sustainability analysis depends on information reported by companies and third parties, which may be incomplete, inconsistent, unavailable or inaccurate, particularly for smaller companies that do not publish sustainability reports. Assessments of these factors involve judgment, and there is no assurance that considering them will improve returns or reduce risk.
Third-party study. The WEDGE Capital Management study cited above is independent third-party research on historical data for U.S. equity products in the eVestment database. Riverwater Partners did not conduct the study and has not independently verified its data or conclusions. The Sustainable Value Strategy was not included in the study, and its findings do not represent the performance of the strategy or of any Riverwater account. The study’s returns are gross of fees, are measured relative to Russell style benchmarks, and in part rely on hypothetical assumptions, and the inclusion of fees would reduce the returns presented. A product’s longevity is not an indication of its performance or of future results.
Certified B Corporation. Riverwater Partners became a Certified B Corporation in 2018 and applies to B Lab for recertification every three years. Riverwater Partners pays fees to B Lab in connection with obtaining the certification and maintaining its membership as a Certified B Corporation.
Riverwater Partners is a Registered Investment Advisor with the U.S. Securities and Exchange Commission (SEC).
