Trustnet Magazine 54 September 2019 | Page 34

In focus [ TRUST ] 34 / 35 Manager Alastair Mundy’s value style has been out of favour for some time – but he says the reasons for this are cyclical, not structural Temple Bar FE TRUSTNET has been one of the most challenging periods for value managers in his career, he pointed out “there are two sides to every coin”. “All value investors will feel rather beaten up at the moment, but at the same time rather excited about their opportunities,” Mundy finished. FACT BOX MANAGER: Alastair Mundy / LAUNCHED: 24/06/1926 / DISCOUNT/PREMIUM: -6.2% / OCF: 0.47% FE CROWN RATING PERFORMANCE OF TRUST VS SECTOR AND INDEX UNDER MANAGER IT UK Equity Income (307.16%) Temple Bar Investment Trust (391.25%) FTSE All Share (301.25%) 500% 400% 300% 200% 100% 0% 5 ct -100% “If you look at the yield curve, investors have regrettably given up on inflation ever moving higher in a significant way again, which we think is a little bit backward-looking,” he added. “Perhaps people aren’t necessarily focusing on why that has been cyclical rather than structural and, therefore, we wonder if investors have got a portfolio which is future-proof, or whether it’s actually history-proof.” Mundy said that even if the reasons for value stocks being aggressively sold down are correct, he would argue “there are some babies that have been thrown out with the bathwater”. He added that both value and growth have had their “periods in the sun” over the years and when either of them is doing well, that performance tends to get extrapolated. “Unfortunately, that often means that when investors fall in love with A lthough Alastair Mundy’s value approach to investing has been out of favour for much of the post-global financial crisis period, his Temple Bar Investment Trust has still been able to comfortably outperform its peers over this time. However, the manager warns it will take something drastic for his style to become “sexy” again. “For value to do particularly well, you really have to believe that the yield curve is going to change shape significantly and bond yields are going to rise,” he explained. While the recent inversion of the yield curve has raised fears of a recession, Mundy said there are several developments that could be positive for value stocks – for example increased government expenditure and growing tolerance of inflation could help push yields higher. any sort of investment style, they seem to take their eye off the ball in terms of the valuations they’ll pay.” The manager added that there has been even less emphasis on valuations recently, which can often lead to “sub-optimal decision- making”. And although he said this Source: FE Analytics trustnet.com