Home / News / Value back on top in a market in shock

Value back on top in a market in shock

News

Value investors have staged their long-prophesied comeback during the highly volatile start to the year. But questions remain about whether this performance will be prolonged.

March stands out as being one of the most difficult periods for investors in a generation. On the one hand, bond markets sent fixed income to its worst return in more decades; on the other, equity markets were sold off broadly on valuation concerns as bond yields ended a 40-year downward trend. It is during this sort of volatility that active managers have the greatest opportunity for outperformance.

According to extensive performance data, the divergence between the top and bottom performing global equity funds, in which currency was not hedged, was a positive return of 7.1 per cent and a negative return of 26.3 per cent in the March quarter. That is 33 per cent from the top to the bottom in just three months. This compares to the MSCI World, which delivered a return of -8.4 per cent and the S&P500 which returned -4.6 per cent.

The biggest headline of this highly volatile period was the long-awaited outperformance of so-called ‘value’ investing versus growth. This was highlighted by both the listed and underlying investments held by the top performing strategies, the majority of which are household names, some from the 1990s.

Topping the leader board was the PM Capital Global Companies Fund, with a return of 5.3 per cent driven by a significant weighting to unpopular, old-world companies across the commodities, energy and industrial sectors. It was a similar story for both the GQG Partners Global Equity Fund and the Lazard Global Equity Franchise strategy, with the latter French manager well-known for this stoic view of value investing.

GQG was likely the surprise, with the Rajiv Jain-led, ASX-listed group a distinctively growth-oriented manager that had a sizeable exposure to technology just a few short months ago. As it stands, the forward-looking growth manager has no technology exposure and suggests the sector is significantly more cyclical than many investors, even professionals, had believed.

Among the worst performing funds were those that had performed most strongly in the last few years. The truly growth-oriented managers bore the brunt of underperformance from the likes of Facebook, Netflix and smaller technology names with anything containing ‘Innovation’ in their name selling off heavily. Bailie Gifford, WCM and T Rowe Price were those lagging at the bottom of the table, albeit for one quarter.

The trend continued with the likes of Antipodes, Talaria and Vanguard’s Value factor-driven strategy delivering. One of the big questions that must be considered is whether this is the turning point for a decade of underperformance from value, or simply another bump in the road to growth. A clear case can be made for either option, with China lockdowns and Russia-driven commodity shortages muddying the waters between value investing and short-term trends.




Print Article

Related
Why taming the inflation tiger will be harder than the 1970s

Inflation is making a latter day comeback, and a financial system “sanitized by 15 years of free money” is totally unprepared. It’s time, once again, for tough medicine. Inflation hasn’t been this high in 40 years, but investors have become convinced that central banks can still tamp it down it with relative ease – a…

Lachlan Maddock | 27th May 2022 | More
Bragg offers a super manifesto (from opposition)

One of the Coalition’s few surviving  “super soldiers”, Andrew Bragg has called on his party to go further down the route of “flexibilising” super – if not abolishing it completely. Senator Andrew Bragg finds himself in a curious position following Labor’s election win. He’s one of the few super partisans to survive the teal clean…

Lachlan Maddock | 27th May 2022 | More
Appen left at the altar. Market heads lower. Good week continues for US markets.

Appen left at the altar A bizarre blink-and-you-missed takeover approach came and seemingly went for one of the local market’s tech leaders Appen, which develops the datasets for machine learning and artificial intelligence. Canadian company Telus International sprang a $9.50 a share bid on the company, which said it would talk to Telus to try to…

Drew Meredith | 27th May 2022 | More
Popular
1
News and OneVue go live with brightday
Alec Law | 11th Jan 2015 | More
2
Perrignon off to HK with Credit Suisse
Alec Law | 22nd Dec 2013 | More
3
Sports betting as a new asset class
Alec Law | 3rd Jul 2016 | More
4
BlackRock ahead of consensus with bullish view
Alec Law | 14th Jan 2017 | More
5
Statewide seeds bespoke Apostle fund
Lachlan Maddock | 23rd Mar 2022 | More
6
UniSuper’s VC foray a sign of things to come
Lachlan Maddock | 25th Mar 2022 | More