The market continuous its shift in favour of growth stocks, leaving fund managers with a value-focused investment strategy struggling to keep up with the index, according to Lonsec Research.
Value investors were those that were looking for well-run businesses with solid company fundamentals that may be undervalued due to industry headwinds or temporary negative events.
According to the Lonsec study, value shares managed to outperform growth over the past ten years despite a value comeback in 2016 and the early part of 2017, however, recent performance proved the average return for value managers was in negative territory so far in 2018.
Lonsec said the behaviour of value and growth shares over different periods and the tendency for one or the other to outperform underlined the importance of diversification, not just across markets and sectors, but cross investment styles as well.
Also, despite the weaker performance of Australian shares in 2018, growth companies remained in favour and the companies operating in the consumer staples and biotechnology business were the main drivers of market returns.
At the same time, value shares which were represented by the MSCI Australia Value Index were weighed down by poor performance from financials and telecommunications shares, including the major banks that were under pressure from the Royal Commission into Financial Services.
