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ANALYSIS: Value vs growth not a black and white issue

Ignore the politics. If there’s one takeaway for investors from 2016, it’s the move from growth to value.



Still a closer look at the make-up of these indices gives confusing signals, as Peter Askew, CEO and fund manager at T. Bailey Asset Management, explains:

“To illustrate the definition problem, the top participant in the MSCI World Value and the Growth Index is Apple (1.63% and 3.86% respectively).

“For many Apple is just a growth stock. The MSCI World Value and Growth Indices like many such indices are imperfect at best not least for those that continue to use indices as portfolio construction tools.”

Askew is also dismayed that Berkshire Hathaway, run by the world’s most famous ‘value’ investor, appears as the seventh largest participant in the Growth index.

So, how should retail investors play factor moves? Askew suggests that a modern value trend that is sustainable could be a theme like infrastructure which has political will behind it. In T. Bailey’s portfolios, there is not a value/growth demarcation line. 

“Recently we were asked if we should be allocating more to commodities to reflect an upturn in global economic activity,” he explains.

“Our response was that we had already been looking at those materials needed for the modern world and added a manager that benefited the portfolio’s risk/reward relationship. We did not assign a growth or value tag to that holding.