Peter Hargreaves: Coronavirus crisis has been 'salutary' lesson for traditional fund managers

Stocks with low ratings, which are generally prized by value-oriented investors, have previously outperformed companies on expensive valuations during times of market stress.

However, in the market sell-off experienced in March 2020, so-called value stocks continued to underperform more growth-oriented companies, with chairman of Blue Whale Capital Hargreaves noting the example of Facebook, Amazon, Apple, Microsoft and Google owner Alphabet as having "delivered a general surprise".

"These companies, clumsily labelled 'tech giants' and therefore considered 'risky', have managed rather well," Hargreaves said.

The reason for this, he ventured, was lockdowns across the world have forced consumers to rely on these online platforms.

"The FAANGs have been the conduits to aid communication and trade during this lockdown," the co-founder of investment platform Hargreaves Lansdown explained.

"There was a feeling that technology had already been universally embraced - that proved not completely true, but rest assured the take up has now burgeoned."

The result, Hargreaves elaborated, has been "a guide to one of the most important changes in the world economy".

For "traditional fund managers who still court the old world order", meanwhile, "it has been a salutary lesson".

Hargreaves said: "Previously they relied on recovery stocks recovering and cyclical stocks rotating back to prominence. It is my belief that this strategy is now outdated - many of these recovery and cyclical stocks may not even survive.

"Taking the 'ostrich strategy' of ignoring your losses in the hope the stock will bounce back as before could lead to a surprise - and not necessarily the one you were hoping for.

"I firmly believe there is valuable lesson which I do not think has been widely acclaimed - it is vital you understand in detail everything about the companies in which you invest.

"The bar stool tip might perform short term but unless you know the reason for investing you cannot decide whether to sell or keep long term."

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