Peter Green, general manager, Australian equities, Lonsec
Australian growth fund managers continue to benefit from a run of outperformance that has persisted over the past decade, despite the possibility of a comeback by value investors in 2017. Over the 12 months to June, growth managers extended their lead, with an average return of 15.8% versus 10.2% for value fund managers.
Value investors look for well-run businesses with solid fundamentals that may be undervalued due to industry headwinds or temporary negative events; growth investors look for businesses with high growth potential or earnings momentum.
The behaviour of value and growth shares over different periods, and the tendency for one or the other to outperform, underlines the importance of diversification, not just across markets and sectors but also across investment styles.
Despite the relatively lacklustre performance of Australian shares in 2018, growth companies have remained in favour and are currently the main drivers of market returns. They include consumer staples such as A2 Milk and Treasury Wine Estates, as well as some big names like CSL.
Meanwhile, value shares (represented by the MSCI Australia Value Index) have been weighed down by recent poor performance from financials, including the major banks. The banks may become attractive propositions from a value perspective but the question is how long it will take before they regain favour from the broader market.