As the Isa season begins to gather momentum, the fund picker faces a world in which value looks to b...
As the Isa season begins to gather momentum, the fund picker faces a world in which value looks to be dead as a concept. Even its keenest supporters have got to admit that at best it has been badly stunned but will it ever revive and if so, when?
The real winners in 1999 were those who picked the growth sectors and ignored value. The success of growth was not just a UK phenomenon but a global one as managers with high exposure to technology, telecoms, support services, media and IT powered ahead.
A fund such as S&P Japan Growth rose some 229.4% during 1999, helped by its high exposure to telecoms and internet stocks. In the US sector, Fidelity's fund has had spectacular performance by loading up the portfolio with similar plays.
Back in the UK, investors with Perpetual have had a wretched time as its equity team has avoided telecoms altogether and the result has been poor one-year figures. In the UK All Companies sector, its UK Growth fund has risen some 5.2% in 1999 against 23.5% for the peer group.
Both the FTSE 100 and S&P 500 rose in 1999 but in each index more stocks went down in value than went up. As the fund picking season starts again it is worth asking whether we are at the top end of a narrowly based market bubble or whether there really is a new paradigm emerging where growth potential is more important than actual earnings. After all value managers looked to be doing fairly well at the start of last year only to see themselves fall behind in the second half.
As the fund marketing season gets going it is going to be interesting to see which of these two camps fund groups are going to put themselves in.
At the risk of having a foot in both camps, the good fund managers will come out on top in the long term regardless of their investment style. If the basis of the investment markets is beginning to alter then they will be able to pick up on that and take it on board. The fund managers to avoid are those who lack this degree of flexibility. In 10 years technology will probably have turned out to be the dominant investment theme of the decade but not everyone who is running a tech fund or who has a strong tech bias is going to be a winner.
As ever the job of picking the good long-term fund managers and ignoring the unproductive marketing fads is at the heart of getting the right investments for clients.
Three years at Wells Fargo
Effective from 9 December 2019
One firm with permission suspensions left
Continuing the Architas education series for clients.
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