Manager performance affected by volatility

Manager performance affected by volatility

Sudden shifts in equity markets can have a profound effect on individual investment manager performance, according to a study by Frontier Advisors.


The company examined the difference in performance between value and growth investment strategies, and Frontier Advisors director of research Fraser Murray noted that value managers experienced their best quarter “in well over a decade”.

Mr Murray said the result of the US presidential election had been a positive for “market segments which have been out of favour in recent years” such as financials, materials and industrials.

These segments are more likely to be found in the portfolios of value managers, while growth managers are more likely to be invested in consumer staples and health care – two segments that Mr Murray said had been negatively impacted by Donald Trump’s election win.

“In a relative sense, the fourth quarter of 2016 was the best performance for the value style, and worst for the growth style, since the early 2000s,” he said.

“In fact, it was actually the first strong value quarter in many years and better than any quarter during the GFC and the subsequent recovery. It is only when the technology bust is considered that value had a notably better period.”

Prior to September 2016, growth managers had “consistently and strongly outperformed” value managers, Mr Murray said, but added that within the final three months of the last calendar year had lost much of that outperformance.

“Our findings are not intended to indicate superior skill of one group over another but rather highlight the speed at which pockets within equities markets can change, and of the impact that can have on specific manager performance,” Mr Murray said.

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