We looked under the hood of three popular Large Cap Value Value funds to see exactly what investors are exposed to…
- We looked at three Large Cap Value funds: Pzena Global Value, Barrow Hanley Global Value Equity and Acadian Global All Country Equity.
- All funds provide high Value exposure, but different exposures to Growth, Volatility and Momentum.
- All funds have very different exposures to industries and sectors.
- This has a direct impact on fund performance.
Value investing is getting a lot of attention. Earlier this year, many thought the strategy was dead. But we expected the 2020 election to bring a large shift from Growth and Momentum stocks to Value stocks. That is exactly what happened. But what are Value investors actually getting? We looked at three Large Cap Value funds: Pzena Global Value, Barrow Hanley Global Value Equity and Acadian Global All Country Equity, to see what investors are exposed to. We found that the Large Cap Value funds have very different exposures to investment Styles, industries and even to different types of Value stocks.
Global Large Cap Value Funds: Sub-Factors Matter
The three funds were analyzed over the past two years compared to the MSCI World Index. We created a peer group of 230 Global Large Cap Value Funds using the Style Analytics Peer Insights™ tool. The yellow squares in Figure 1 show the Style Tilt™ for the Pzena fund across 16 sub-factors within the seven investment Styles. The shaded areas show the quartile ranges for the funds in the peer group. The zero-line represents benchmark (MSCI World) exposure, showing that all the funds in the peer group’s light blue shaded area provide above-benchmark exposure to Value.
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The Pzena fund delivers outlier exposure to Value regardless of which sub-factor is used. It also delivers very low Growth, Quality and Momentum exposure compared to its peers. Its exposure to Smaller Cap stocks is consistent with its higher-than average Volatility and it has a strong exposure to deep Value.
Figure 2 shows the Acadian fund (blue circles) compared to the same peer group of 230 Global Large Cap Value funds. Acadian has a more measured exposure to all Styles, with less concentrated Value exposure (in the second quartile of Value measures). It provides high exposure to Quality on two sub-factors: Return-on-Equity and Low Gearing (Low Leverage) and provides high exposure to both short- and long-term Momentum. While the Acadian fund does provide exposure to Value stocks, it is a balanced Value fund.
Read the full article here by Damian Handzy, Head of Research and Chief Commercial Officer, Style Analytics