The prospect of higher interest rates has contributed to recent equity market volatility and provided a wake-up call for investors underweight some traditional value sectors. What may surprise some investors is that even managers that style themselves as value-oriented may be underweight bellwether value sectors. Now is a good time to sharpen your pencil on value manager exposures.
A market environment with a wider breadth of winners and losers provides greater opportunity for skilled active managers to distinguish themselves. Given the more balanced earnings contribution across sectors relative to 2020–21 and the widely dispersed equity valuations, we expect the breadth of winners and losers will be wider in 2022.
The style bias of actively managed growth and value equity portfolios is not typically static. In this paper, we highlight how the strength of active managers’ style signatures have moved between value and growth and propose a simple fundamental rationale for why this happens.
Yes, active equity managers tend to perform better when the average stock within a market capitalization–weighted index outperforms the index itself.
Yes, because rising concentration reflects rising valuations for the largest stocks, which are likely to serve as a headwind to index returns. Further, the growing market share of these companies increases the potential for rising regulatory oversight.
As 2020 comes to a close, we expect some key investment drivers to persist into next year. While our views speak to many different challenges confronting investors, including the poor bond yields on offer, the fate of US-China relations, and where to find growth, they are rooted in the belief that 2021 will be a year of healing for the global economy.
We are asked this question on a regular basis, but believe it is fundamentally the wrong question for investors to ask if they are seeking to outperform the market over the long term.
Global value style equity investing has been challenged in 2015, but long-term investors may be well served by staying the course, as the time to rebalance further into value may be on the horizon.
We are not unconditional advocates for or against active management; investors have different circumstances. However, while there are many logical rationales for favoring index over active investing, the recent performance struggle of the average active manager is not among them.
As assets managed in passive vehicles hit new highs, reiterating the difficult task faced by traditional active managers as a group has once again become a popular pastime. We concur that the collective group will always be challenged but contend that a small segment of the group is worth it, as defined by historical and…