Value  

Advisers urged not to fall into market-timing trap

 

Advisers have been urged to avoid timing the market amid a warning many may have unwisely written off value-orientated equity fund managers.

Dan Brocklebank, UK director at Orbis Investments, told FTAdviser the most important action advisers could take for clients was to ensure they have a diversified portfolio in the face of changing investment styles. 

He said: "The first thing advisers can do is not try and time any change in the market, because market timing is incredibly difficult to do - successfully at least. Anyone can try but [it is] hard to do well.

"If you look back at the last ten years the successful funds have all been relatively similar in style, favouring large-cap growth companies.

"The most important thing for advisers to do on behalf of their clients is to make sure they have a diversification of styles within there.

"Unfortunately what we've seen over the last ten years is that advisers have increasingly capitulated on value-orientated managers because of the underperformance many of them have shown."

Value investors focus primarily on the share price and valuation of a company, meaning they typically buy companies trading at below their long-term average valuation and below the valuation of the market as a whole. 

In contrast growth investors tend to focus more on the long-term returns a company can be expected to achieve, and less on the current share price or valuation. 

Mr Brocklebank said it was unfortunate that "successful" investing tended to be in unpopular areas of the market, a tendency that went against human nature which favours the "comfort of the crowd".  

damian.fantato@ft.com & rachel.mortimer@ft.com 

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