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Adviser Fund Index – A return to market values

Following an AFI survey sent to panellists in March, not one of the 10 respondents expected value to outperform growth in the following 12 months. Now, however, some panellists are more optimistic about value.

Ben Willis, head of research at Whitechurch Securities, says he favours value over growth in the medium to long term. He says the growth seen in commodities, oil and gas will come to an end and predicts that value will make a resurgence.

He says: “I do think the growth story is set to run in the near term but value will make a strong comeback. We favour value at the moment.”

Willis, who likes to be contrarian, says there exists opportunities in “bombed-out” areas such as property and banks.

“There will be a significant upturn in those areas in the next two to three years. The commodities run is going to end,” he says.

Funds Willis holds in the AFI that have a value bias include Bill Mott’s PSigma income fund.

Willis says: “Bill Mott made a call on the banks last year. Some people have said he went in too early but he is looking at a three-year view and is selective.”

Indeed, the biggest sector weighting in the £379m PSigma income fund, which launched in April last year, is banks, as at March 31.

Its biggest holding is HSBC at 6.8 per cent while Lloyds TSB and Royal Banks of Scotland also feature in its top 10.

Willis also holds the £947m Artemis UK special situations fund managed by Derek Stuart and says that Stuart is beginning to recognise value in small and mid-cap stocks.

He says: “The fund is starting to rotate to some small and mid-cap sectors Small and mid-cap have got dragged down indiscriminately so the value is unbelievable. They will re-rate in the med-ium to long term.”

Like Willis, James Davies, investment research man-ager at Chartwell Investment Management, is also more optimistic about value than growth over the next year.

Davies says: “If I had to come down in either camp, I’d have more of a bias to value over the long-term. There is so much inherent value in the market right now. Value might well do better over the next 12 months.”

Davis also holds the PSigma income fund in the AFI although he says his decision has more to do with its asset allocation than the fact that manager Bill Mott is a value investor.

Davies explains: “I don’t necessarily view things as clear cut growth or value. I am aware of the argument that over the next 12 months value might not do so well but I think that is overstating the value trap.

“Because the consensus seems to be that growth will do better than value, that makes me nervous in true contrarian style.”


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