Schroders’ co-head of global value, Nick Kirrage, says he would be “staggered” if the wobbles seen in markets this week mark the end of the rally in value stocks that began in the second half of last year.
This week Wall Street indices saw their worst falls since Donald Trump’s election as markets began to lose faith in his ability to pass pro-growth policies. Sectors typically associated with value, such as financials and commodities, were particularly hit.
But Kirrage rejects the possibility investors have missed the boat, arguing value is at levels of underperformance that are worse than the tech boom, even despite last year’s rally.
“If you can invest for five years plus, we’re in a place now where that trade is one where, despite having seen some good performance in the second half last year, I would be staggered if this is the end of it over the next five or 10 years,” Kirrage says.
The manager’s Global Recovery fund has returned 29.1 per cent over six months and his UK-focussed Recovery fund has returned 23 per cent, according to FE data. Kirrage runs both funds with co-manager Kevin Murphy. In contrast the IA Global sector has returned 26.6 per cent and the UK All Companies sector has returned 17.5 per cent over the same period.
He adds that the style debate between value and growth has been off the table for the last 10 years because the underperformance of value has been so substantial that everyone moved to a growth strategy.
But he says events last year show the style debate needs to return. Investors thought they had diversification of funds, managers, and fund houses, but without diversification of style investors got carried out with the value rally.
“We saw six very strong months for value and 85 per cent of fund managers underperform.”
Kirrage believes the style debate will be a theme that comes to the fore over the next three to five years. “If something’s been so out of favour for such a long period of time, you just haven’t had to talk about it, and it’s going to force it’s way back into the debate.”