Paul Heathwood, CFA, Director of Investor Relations, highlights why active value has become a contrarian exposure in this short clip. Read the highlights below.
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Not “Intrinsic” Value, Genuine Value
Catalysts in Play: It’s no secret that fund flows over the past decade have gravitated to passive strategies. According to capital markets and economic research firm Strategas, this shift has been even more pronounced in the value category, where ETFs tied to the factor have registered $163 billion in net inflows since 2008, more than twice as much as growth-oriented ETFs. The same trend can be seen in the Morningstar data, where AUM flows into passive value seem to be coming at the expense of active value exposures.
Entry Points: This imbalance suggests investors are utilizing ETFs to capture value beta. Investors with a contrarian bent, however, may appreciate the alpha opportunity this creates to utilize an active approach for their value allocation.
- A Turn to Value: Historically, value tends to outperform during the early stages of a recovery as well as during inflationary periods when escalating prices favor companies with real assets. For these reasons, many investors have already been rotating into value strategies aggressively since the summer.
- A Turn to Active Value: What many may overlook is that genuine value — a term introduced by consultant Mercer to distinguish active- versus passive-value exposures — can maximize total returns as the value cycle takes shape.
- History as a Guide: Over the past 25 years, genuine value as delivered by Boston Partners has outperformed passive benchmarks to an even greater degree when value outperforms growth. This has been true not only across large-cap portfolios, but is evident in all-cap and small-cap portfolios as well.
Active Strategy: Boston Partners’ strategies offer specialized actively managed value equity investing across a variety of geographies, market capitalizations, and long/short. The construction of our portfolios is guided by a sensible set of fundamental truths that have been tested over time and various market cycles.