Active vs. passive for global value funds

aroominyork

I want to add a global value fund to my portfolio. Artemis Global Growth (curiously named for a value fund...) seems as good as any and I am comparing it to index/ETFs. None of the global value ETFs seem to have been around for long but of the choices, eg Vanguard’s VVAL, they seem to perform as well if not better than active funds. I would have thought that for value funds you especially need some active management: there must be lots of companies that have low multiples for a good reason. So my question is how does the active vs. passive debate play out for value funds?

masonic

The first question you should be asking is whether there is any evidence that a cheap mechanical version of value investing can consistently outperform a cheaper market cap weighted portfolio after fees.

MPN

aroominyork wrote: »

I want to add a global value fund to my portfolio. Artemis Global Growth (curiously named for a value fund...) seems as good as any and I am comparing it to index/ETFs. None of the global value ETFs seem to have been around for long but of the choices, eg Vanguard’s VVAL, they seem to perform as well if not better than active funds. I would have thought that for value funds you especially need some active management: there must be lots of companies that have low multiples for a good reason. So my question is how does the active vs. passive debate play out for value funds?

Maybe a question for Linton, I believe he's a long term holder of Artemis Global Growth?

Linton

I thought I heard somone calling my name!



Over 5 years: VLS100 up 65.8%, Artemis Global Growth (AGG) 81%. But in the last year or so VLS100 has performed better. AGG goes for low P/E larger companies. Over the past year or two though it has suffered as the high P/E tech stocks have performed better. I chose it for sector diversification - its tech % is rather low and balances the high tech % in some of my Small Company funds.


My view on active vs passive is that sector allocation is an important factor and is not easily controlled with passive funds. Active funds are more likely to have a steady long term strategy whereas passives go over-enthusiastically for what is currently fashionable.


If you are going for shares with a low P/E you do need human intervention to identify those shares whose low P/E is well deserved.

Thrugelmir

Linton wrote: »

Active funds are more likely to have a steady long term strategy whereas [STRIKE]passives[/STRIKE] investors go over-enthusiastically for what is currently fashionable.

My personal take.

aroominyork

Linton wrote: »

If you are going for shares with a low P/E you do need human intervention to identify those shares whose low P/E is well deserved.

That’s my question – is there evidence for that? Value index funds seem to do better than I would expect compared to active funds like the Artemis.

Linton

aroominyork wrote: »

That’s my question – is there evidence for that? Value index funds seem to do better than I would expect compared to active funds like the Artemis.

Vanguard Global Value has only been around for 3 years so perhaps it is a little early to say, but over this period it has significantly outperformed Artemis Global Growth.



However, as usual in these comparisons there are other factors, For example Artemis Global Growth is 17% small/medium companies. Vanguard Global Value is 51%. Is the performance difference due to better value investing or being in a different sector of the market? If you look at the performance comparison over each year the Vanguard fund only did much better than AGG in 2016, but then small company funds globally performed well, particularly in the US where the Vanguard fund is more highly invested.


With my investment strategy it doesnt matter as asset allocation is more important than indiviudal year's performance. Vnguard Global Value would not satisfy the requirements that led to my use of AGG. Other people's strategies will be different and lead to different investment choices.

dunstonh

When you go for specific investment strategies, such as value/spec sits, equity income etc, you tend to find that they will be better in one period of the economic cycle and worse in another.

aroominyork

Linton wrote: »

Vanguard Global Value has only been around for 3 years so perhaps it is a little early to say, but over this period it has significantly outperformed Artemis Global Growth.

However, as usual in these comparisons there are other factors, For example Artemis Global Growth is 17% small/medium companies. Vanguard Global Value is 51%. Is the performance difference due to better value investing or being in a different sector of the market? If you look at the performance comparison over each year the Vanguard fund only did much better than AGG in 2016, but then small company funds globally performed well, particularly in the US where the Vanguard fund is more highly invested.

With my investment strategy it doesnt matter as asset allocation is more important than indiviudal year's performance. Vnguard Global Value would not satisfy the requirements that led to my use of AGG. Other people's strategies will be different and lead to different investment choices.

This is very helpful - thanks. I read that value ETFs tend to be mega cap and had not drilled down to appreciate the market cap differences between the different funds. So it is clear there are various ways to skin a global value ETF cat and I have a chunk more research to do.

I also only realised yesterday that the Vanguard fund is actively managed (though with ten times as many holdings as the Artemis) which, I think, happened after Jack Bogle's day and about which he greatly disapproved.