Cover story
“Investors need to make sure they aren’t seduced by
low valuations and/or weak share prices with a high
dividend yield”
Proving its worth
included a new thematic range from
In the last quarter of 2019, value
BlackRock and the Schroders Global
stocks finally started to reverse
Energy Transition fund.
their long run of weak performance.
Pascal Blanqué, chief investment
Burdett says that some of the value
officer at Amundi Asset Management,
funds he holds are now among his
wrote in The Financial Times:
best performers for the year to date.
“Environmental, social and governance However, few believe it heralds the
factors are a pillar of investing,
start of a surge for value strategies. “It
holding more than $30tn of assets
is more of an even fight. There hasn’t
after impressive growth of 34 per cent
been inflation, or rising rates, which
over the past two years. So powerful
would normally help value strategies,”
is momentum, the fund industry will
Burdett adds.
most likely embrace a near 100 per cent
Dan Whitestone, manager of the
ESG-based model by 2030.”
Throgmorton Investment Trust, also
Morningstar data shows £4.4bn was doubts this is the start of a broader
invested in ESG funds in the first nine reversal, pointing out that technology
months of 2019: 70 per cent of those
has changed the game: “Some market
inflows headed into active funds.
commentators believe the second half
FE TRUSTNET
[ 2019 IN REVIEW ]
12 / 13
of 2019 marks the start of the ‘value’
comeback. We disagree. Many shares
and industries that are often thought
of as ‘value’ are undergoing significant
industry pressures, and in many
cases lack the financial strength and
business model flexibility to adapt to
the structural changes brought about
by technology disruption, which
can result in fundamental changes
in distribution, manufacturing and
customer behaviour.
“There are many companies that
come to mind that we think are
masquerading as ‘value’ investments
just because they trade on a low price
to adjusted earnings.”
In particular, he believes many of
these companies are paying dividends
they can’t afford, which has led to
under-investment in the business.
Certainly, there have been a number
of high-profile dividend cuts in 2019
and dividend cover among the biggest
UK companies has started to look
stretched. Whitestone adds: “Investors
need to make sure they aren’t seduced
by low valuations and/or weak share
prices with a high dividend yield.”
Trade wars were the other dominant
factor for 2019. Negotiations
continued, but markets seemed to
learn to live with the uncertainty.
With an election to win in 2020,
Donald Trump needs to gain some
concessions from the Chinese
government that he can boast about
to the US electorate. In the meantime,
it appears that trade tariffs may be
having a greater impact on the US
than on China – this may change the
balance of negotiating power.
In recent years, the story has been
surprisingly consistent – bonds have
done better than expected, quality
growth companies have prevailed in
the equity market, monetary policy
has driven markets – and 2019 was no
exception. However, it is difficult to
picture a repeat in 2020.
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