Blog

What’s the Future for Value?

Returns to the Value factor continue to disappoint. Against Momentum it has been almost one-way traffic for the whole of 2020, whilst in the longer term, we are now approaching the low point (for Value relative to Growth) reached in 2000 as per the Russell 1000 Index. [The Russell 1000 Index represents the 1000 largest capitalisation firms in the US]. Brief spikes in Value (as seems to be happening currently) last only a few days, before the selling resumes anew.[Note: the chart below plots Value against Momentum, not growth; but a nearly all the highest momentum scoring shares ARE growth shares, they amount to one and the same]. In case there should be any doubt, it IS a global phenomenon; only US Value has beaten the MSCI World Index, and all major Value regions have even lagged long-dated UK Government bonds, which are a risk-free asset.

Active versus Passive Q&A

From time to time both ourselves and our clients get contacted by journalists looking for quotes and views on the debate surrounding Active and Passive Investing, which (usually) revolve around asking us what our investment approach is, or how we use the two types of investment strategies for our portfolios. So, in order to formalise our response and to give clients an idea of how to respond should they receive similar enquiries, we decided to put our views down “officially”, in the form of a Q&A.

The Worlds Ablaze

Market Commentary | November 29, 2019

More than two years ago, we discussed the rise in social unrest across the globe as nations start to split apart. This has got much worse since then and it appears to have become generalised as the cleavage between populations has now spread to families. Why now and how will it all end?

Aramco and the future of Oil.

Market Commentary | November 15, 2019

A pub quiz question- what has been going on for more than 3 years, amid much frustration and bemusement to all involved, having got nowhere at all during that time and is not Brexit?

How ESG are the ESG fund providers?

ESG Investing | November 1, 2019

One could argue that good ESG starts at home, and not just with a product range. As demand and awareness around environmental, social and governance factors grow, ETF providers are under increasing pressure to showcase their own good practices.Fund houses will also have to become more transparent on ESG, whether they like it or not. By 2020, the European Commission will require investment houses to disclose how they integrate ESG opportunities and risks into their processes to stop funds being labelled as ESG when they normally wouldn’t qualify – otherwise called ‘greenwashing’.

The Repo men

Market Commentary | October 25, 2019

In the context of financial markets, Repo’s refer not to repossessions but repurchase agreements. This is the process whereby banks who are (temporarily) short of money can borrow from those who have excess cash so that they stay within their legally required reserve requirements. Generally, the interest rates charged are that of the prevailing Fed funds rate, which s currently in a range of 1.75-2%.

Gender Equality

Evidence Based Investing | October 18, 2019

Under the ESG umbrella, there is another category that pertains more to the ‘S’ and ‘G’ letters – gender equality. Given the rise of movements like MeToo and TimesUp, there is increased recognition and acceptance of gender equality and diversity at work. And thanks to UK government-backed initiatives like the Women in Finance charter, the Alexander Hampton review, which aims for 33% women on boards of all FTSE 350 companies by 2020, as well as mandatory gender pay gap reporting for companies with more than 250 employees, gender equality has become less an esoteric aim and more mainstream.

Going Underground

Market Commentary | October 11, 2019

“At the end of the day, it’s not a normal condition to have interest rates at zero”- Lloyd Blankfein (Goldman Sachs CEO). Quoted in June 2014.

Beached

Market Commentary | October 4, 2019

Equities can be seen as a “call option”on the future growth of a company; once the liabilities due to bondholders are paid, the surplus accrues to shareholders in the form of dividends/share buybacks, etc. or are re-invested to generate future growth in the firm. At least, this is what happens most of the time, but every now and then, things go awry, a company fails and the “call option” expires worthless. It is not a common occurrence, but when it does happen, the shareholders tend to lose everything.

All the Same Things

Evidence Based Investing, Factor Based Investing | September 20, 2019

“If all you’re trying to do is essentially the same thing as your rivals, then it’s unlikely that you’ll be very successful” – Michael Porter. In the last fortnight, there has been something of a reversal in the market’s favorite Factor trade – long Growth/Momentum and short Value. It began in the US, but as is normally the case, it soon went Global. As a result of this, months of gains in Momentum (long) and Value (short) were lost in a matter of days. But one would not have known anything of this, looking at the Indices, with all major markets seeing gains since the start of September.