Structural headwinds to value stocks

Insync Funds Management, believes that the current resurgence of interest in value style investment will be short lived, and investors should be wary of tweaking a style bias through value managers to chase short term performance advantage.


Part of the rotation into cyclicals such as banks, industrials and turnaround businesses has been driven by a greater consensus around a pick-up in growth and inflation. Insync believes that it is unlikely that the low-inflation regime of past decades will end anytime soon. One of the major headwinds is the collapse in the velocity of money despite the rapid growth in money supply. Unless central banks can find a way to encourage banks to lend more aggressively, the velocity of money will remain a headwind to the ‘reflation’ trade



“Value managers, I believe need a very different world from the one growth managers do to produce outsized returns,” Mr Lobb said. “Value managers have typically performed well during periods of economic resurgence and reflation.”





John Lobb, portfolio manager at Insync noted the recent outperformance of value sectors such as banks and energy companies is “fairly typical coming out of a recession”.


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Disclaimer

Equity Trustees Limited (“EQT”) (ABN 46 004 031 298), AFSL 240975, is the Responsible Entity for the Insync Global Quality Fund and the Insync Global Capital Aware Fund. EQT is a subsidiary of EQT Holdings Limited (ABN 22 607 797 615), a publicly listed company on the Australian Securities Exchange (ASX: EQT). This information has been prepared by Insync Funds Management Pty Ltd (ABN 29 125 092 677, AFSL 322891) (“Insync”), to provide you with general information only. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. Neither Insync, EQT nor any of its related parties, their employees or directors, provide and warranty of accuracy or reliability in relation to such information or accepts any liability to any person who relies on it. Past performance should not be taken as an indicator of future performance. You should obtain a copy of the Product Disclosure Statement before making a decision about whether to invest in this product.

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The rating contained in this document is issued by SQM Research Pty Ltd ABN 93 122 592 036 AFSL 421913. SQM Research is an investment research firm that undertakes research on investment products exclusively for its wholesale clients, utilising a proprietary review and star rating system. The SQM Research star rating system is of a general nature and does not take into account the particular circumstances or needs of any specific person. The rating may be subject to change at any time. Only licensed financial advisers may use the SQM Research star rating system in determining whether an investment is appropriate to a person’s particular circumstances or needs. You should read the product disclosure statement and consult a licensed financial adviser before making an investment decision in relation to this investment product. SQM Research receives a fee from the Fund Manager for the research and rating of the managed investment scheme.

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