We’ve been hearing of a growing trend from clients that investors are adding lower-fee Global Value ETFs to their portfolio to try and tilt their portfolios towards the Value style given the market dynamics this year. As long-term active Value investors it is great to see the Value style regaining popularity, but we did wonder if this is really the best way for Australian investors to gain Value flavour (and after-fee alpha)…
Tapping into our analyst nature, we have done the analysis to confirm our hunch that a fundamental, high conviction approach focussed on Australian equities is a much tastier dish.
We have looked at our MCA Value Equity strategy, and as proxies for ETFs, the MSCI Australia Value and MSCI Global Value relative returns vs. their respective broader geographic benchmarks. We have considered returns over the last 10 years and also since the style came back into favour at the start of Q4 2020 (using data through 30 September 2022). Please note we have shown all data below gross of fees as the index returns we have used also do not include any fees.
Since the Value style rebound started two years ago, we have seen our MCA Value Equity strategy deliver more value “spice” / alpha than the MSCI Australia index has, which has in turn delivered more zest than the MSCI Global Value index.
Annualised alpha (two years % p.a.)
Cumulative alpha (two years)
Tapping into our analyst nature, we have done the analysis to confirm our hunch that a fundamental, high conviction approach focussed on Australian equities is much tastier.
Past performance is not a guide to future returns
Source: Martin Currie; as of 30 September 2022.
Martin Currie Australia (MCA) claims compliance with the Global Investment Performance Standards (GIPS®). The Australia Value Equity composite (EQ_06) contains fully discretionary Australian Equity accounts containing diversified portfolios of Australian equity securities with a “value” investment style bias. For purposes of compliance with the GIPS®, the Firm is defined as Martin Currie Australia (“MCA”) formerly Legg Mason Australian Equities (LMAE), and comprises all assets managed or advised on a discretionary or non-discretionary basis. MCA is a division of Franklin Templeton Australia Limited (FTAL), which is a part of Franklin Resources, Inc. MCAs predecessor firm for GIPS® purposes, was FTAL, which was known as Legg Mason Asset Management Australia Limited (LMAMAL) prior to 1 October 2021. The MCA team has and continues to manage the Australian domestic equities portfolio of FTAL. The Australian Dollar is the currency used to express performance. Returns are presented gross of investment management fees, custody fees, administration fees, tax and net of trading expenses, and include the reinvestment of distribution income. Returns are presented net of non-reclaimable withholding taxes. GIPS Reports and/or the firm's list of and description of composites and limited distribution pooled funds and list of broad distribution pooled funds can be obtained by contacting MCAClientService@martincurrie.com.au.
Inception date: 1 December 2006.
GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein.
Regulatory information and risk warnings
This information is issued and approved by Martin Currie Investment Management Limited (‘MCIM’), authorised and regulated by the Financial Conduct Authority. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested.
The information contained in this document has been compiled with considerable care to ensure its accuracy. However, no representation or warranty, express or implied, is made to its accuracy or completeness. Martin Currie has procured any research or analysis contained in this document for its own use. It is provided to you only incidentally and any opinions expressed are subject to change without notice.
The document does not form the basis of, nor should it be relied upon in connection with, any subsequent contract or agreement. It does not constitute, and may not be used for the purpose of, an offer or invitation to subscribe for or otherwise acquire shares in any of the products mentioned.
Past performance is not a guide to future returns.
The views expressed are opinions of the portfolio managers as of the date of this document and are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. These opinions are not intended to be a forecast of future events, research, a guarantee of future results or investment advice.
Some of the information provided in this document has been compiled using data from a representative account. This account has been chosen on the basis it is an existing account managed by Martin Currie, within the strategy referred to in this document. Representative accounts for each strategy have been chosen on the basis that they are the longest running account for the strategy. This data has been provided as an illustration only, the figures should not be relied upon as an indication of future performance. The data provided for this account may be different to other accounts following the same strategy. The information should not be considered as comprehensive and additional information and disclosure should be sought.
The information provided should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the security transactions discussed here were, or will prove to be, profitable.
Risk warnings - Investors should also be aware of the following risk factors which may be applicable to the strategy shown in this document.
- Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
- This strategy may hold a limited number of investments. If one of these investments falls in value this can have a greater impact on the strategy’s value than if it held a larger number of investments.
- Smaller companies may be riskier and their shares may be less liquid than larger companies, meaning that their share price may be more volatile.
- The strategy may invest in derivatives (index futures) to obtain, increase or reduce exposure to underlying assets. The use of derivatives may restrict potential gains and may result in greater fluctuations of returns for the portfolio. Certain types of derivatives may become difficult to purchase or sell in such market conditions.