PA Roundtable: EM opportunity, fixed income risk and the importance of real value

Added 20th July 2016

At a roundtable in Edinburgh, Portfolio Adviser quizzed five leading wealth managers on everything from the issues that keep them awake at night to where they identify opportunity and value.

PA Roundtable: EM opportunity, fixed income risk and the importance of real value

The roundtable opened with a discussion on the merits of growth and value styles – a debate that has raged for years.

Growth has consistently come up trumps in past years but Gary Millward, financial consultant at Alan Steel Asset Management, said in recent months there has been a transition from growth to value stocks, and added that his firm is interested to see what could happen should momentum continue.

“If you look at the data going back to 1945, growth outperforms value for a period of four to five years and then value comes back really strongly, ranging from a minimum of 50% return on the upside, up to 142% going back to 1969 and 1977,” he said.

He added that data gave him “real confidence” there was evidence to support “a transition into the value space”. He said: “The challenge is finding a value manager that does not have the sector exposures that we are nervous about, namely financials, miners and utilities.”

For Cornelian Asset Managers’ associate director Jonathan Horsfield, the fact value has been underperforming for 15 years raised a question over how managers defined ‘long term’.

“You could buy into value for the long term, but how long is your time horizon? Are you happy to sit there for 15 years? I prefer to buy fund managers who just go where they see the best opportunities. It does not matter whether it is a classic value or growth stock.”

While managers argued over the merits of value investing, there was agreement on the need for consistency in that space.

Andrew Herberts, head of private investment management at Thomas Miller Investments (UK), said: “When putting funds or stocks into portfolios, you want them to do a job you understand and can defend.

“If you are buying a fund because it gives you exposure to a certain tranche of the market you should be concerned if it suddenly stopped doing what you expect it to do in your portfolio.”

However, he added that the debate between the two styles was a short-term distraction as managers should be looking for long-term value from their investments.

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About Author

Geoff Candy

Group digital editor

Geoff Candy joined Portfolio Adviser as News Editor in May 2014. He has been a financial journalist and broadcaster since 2005 and, in that time has worked in both South Africa and the Netherlands, covering everything from high street retailers and construction companies to mining and insurance.



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