The fund managers have been absolutely poleaxed this past month, over everything from outflows to poor performance.
And that comes atop some very weak prior months.
Noting that PTM and MFG have very different investment styles (Value, vs Growth, effectively negatively correlated from an investment style perspective) and also noting that PDL declined (which has multi-asset exposures, ergo not an equities centric concern) the poor performance is more a reflection of a) sentiment towards companies with a material degree of market related operating leverage (ex platforms) and b) the shift from active to passive.
Unpacking a) a fraction more, we mean a valid concern is the level of the market, and on a DAA basis view the market as overvalued. As such, high beta stocks, and specifically, high beta stocks where the earnings are directly proportionate to those markets are a potentially risky play.
We are generally comfortable with that risk, having bought into PTM at a price that, we think, fairly compensates us for that risk.
We also think that PTM’s investment style is more attractive, in the current environment, than MFG’s flagship approach, and this allocation to more reasonably valued companies gives us some degree of comfort where our chief concern for the market is valuation (as opposed to concerns about balance sheet health, or economic weakness, or some other fundamental concern, rather than good old fashioned “expensive”).
More broadly, the yields on offer are quite compelling, although the momentum is terrible, and as such, we’d look for a sector wide stabilisation before materially adding more.
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This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
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