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Soft Brexit could see strong pay-off for value investors

Investors in value stocks and sectors will see value investing pay off if the UK is able to negotiate a soft Brexit deal, according to experts.

Speaking at a Money Marketing  Wired debate this morning, part of The UK Edge, investment specialists touted the benefits of the overlap between growth investing and value investing as market changes open stronger return possibilities for long-term investments.

The Adviser Centre research director Gill Hutchison says: “People thought bond yields and interest rates would rise but it hasn’t happened. A balanced portfolio with some growth and some value assets is the best approach for now. People were nervous after the Global Financial Crisis and they want security.”

Experts agree creating a portfolio most suitable to current market uncertainty will come from switching or blending the two strategies if necessary.

JP Morgan Asset Management investment specialist Andrew Robbens says: “There really is an overlap in growth investing and value investing, and people are always very keen to pigeonhole funds. Fund managers and advisers and even investors shouldn’t discount sectors that are traditionally one way or another.”

Defaqto Investment consultant Patrick Norwood says that while investors want to see quick results, value investing has proved itself.

He says: “History is very on the side of value investing, because there hasn’t really been a consecutive 10-year period where value funds have under-performed.”

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Ten years on from the financial crisis, Robbens says value investing is starting to make its comeback.

He says: “A soft Brexit would be the catalyst for value investing to suddenly really strongly perform. There will continue to be a lot of macro noise for both value and growth investments moving forward, but with current headwinds, it’s likely value investment strategies can do very well.”

Hutchison says investors sentiment towards trusting value investing comes down to advisers and fund managers communicating effectively.

She says: “People can start to feel uncomfortable with fund managers who have a track record of under-performing and advisers then also feel that pressure from their clients to address the issues. A blended portfolio is important in the current market because you just can’t be winning every race.”

Robbens says investors also need to take responsibility and feel they can make decisions.

He says: “You need to believe in the manager whether that’s in growth investing or value investing. Growth managers can tend to veer toward value and value managers can veer toward growth. Value is looking supported by some parts of the macro and investors need to tweak toward what they think is best for their portfolio and for the future dependent on what they think too.”

Despite the strength of growth funds and growth strategies since the financial crisis, Hutchison says value managers are continuing to promote their strategy well.

She says: “Value managers are often very good at explaining the importance of a very long investment horizon. Growth and small cap funds have been doing very well, but there’s a challenge to the flow of the market at the moment, so who’s to say that will continue to be the best approach?”

Does sustainable investing bring weaker returns?

Hutchison says that while relative value managers are doing well this year if positioned across a good mix of stocks and sectors, absolute value managers will continue struggling until the market moves again.

Robbens says: “A value manager has to be really committed and be willing to really explain things to advisers and investors. They have to have conviction and know that it’s sometimes just about sticking your neck out.”

Visit The UK Edge for more in-depth debate and analysis focused on equities 

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Does anybody know when the next pay out from the Friends Life Old with profits fund will be paid out if at all as I was lead to believe it was every five years. Many people stayed in the Old with profits fund and had two pay outs several thousand pounds each time better than the £600 that was offered and many took it and moved into the new with profits fund. As we where busy harvesting and to tied up to read the thick information booklet that came I stayed put in the old with profits fund but now Aviva has control what’s happening??

    • And the relevance to this article is…?

      That aside, Prudential’s house view, almost from day one, has been a no deal Brexit. That prediction is looking increasingly accurate. I wonder what odds the bookies are offering?

  2. By implication then will Remain mean an even better result?

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