Talking Point  

How value investors could profit in the UK market

How value investors could profit in the UK market

If the UK economy evolves in a way that is similar to that of Japan, it is likely that the value style of investing will prove best for investors, according to Ian Heslop, head of global equities at Merian Global Investors.

The Japanese stock market has returned zero over the past three years, as investors grapple with negative interest rates, low inflation and tepid economic growth.

With the UK entering a period of prolonged economic weakness, and low inflation, and with the Bank of England now discussing the possibility of introducing negative rates in the UK, it may be that the UK market echoes the performance of that of Japan.

M Heslop said: “The Japanese market does have a lot of distortions because the central bank there buys equities, and that doesn’t happen in the UK, but I think if you strip that out, the lesson from Japan is that while it is very hard to make money there, it is the value stocks that have made the money.”

Mr Heslop does not himself tend to use the value investing style, and takes the view that it will be difficult for those outside of Japan who use that style of investing to make money in the near future, due to the prevailing economic environment. 

 david.thorpe@ft.com