A survey by Mercer Investment Consulting shows that in the year to December 2001, the median international share manager returned a disappointing -9.4 per cent, marginally better than the MSCI World Index of -10.0 per cent.
At the same time, value managers outperformed growth managers. Indeed, value manager Platinum Asset Management clearly outdid its rivals registering a whopping 16 per cent return for calendar 2001. Its closest rival, AllianceBernstein, clocked in with a 7.8 per cent return, followed by Marathon Asset Management with 5.1 per cent.
Mercer Investment Consulting head of research Greg Liddell says the one year figures show a large dispersion between growth and value managers, with the environment clearly rewarding value managers.
He notes that after the technology bubble burst last year, managers that had bought stocks with high P/E ratios have under-performed, while those focused on balance sheets and certainty of earnings started to shine again.
However, Platinum Asset Management managing director Kerr Neilson says while his group, which picks shares based on intrinsic value, is viewed as a value manager, growth plays a large part in its valuation of stocks.
“We tend to buy middle ranking companies with a $10 to $15 billion market capitalisation compared to big fund managers who have been hiding in the big caps market,” he says.
“We have done well because we own our own business and we think like business managers, not like fund managers trying to protect the business.”
Those heading the list of worst performing international equities managers for calendar 2001 were growth managers Nicholas Applegate Capital Management, which returned -26.5 per cent, followed by Fiduciary Trust with -20 per cent and Marvin & Palmer with -19.5 per cent.
Marvin & Palmer’s Lorraine Jones says her group is a large capitalisation growth manager and the market has been kinder to small capitalisations and value managers.
“Our process is in identifying trends in the market and in the past 18 months, it has been very rotational and that has been difficult for us to outperform … Conversely, we are very good at identifying trends in the market, whether it be sector or country-based like the information technology and telecommunications sector or Japan in the late 1990s,” she says.
“There is no single process that works well in all markets but over the long-term, we are able to outperform as shown by our track record.”
Jack Diamond, vice-president of institutional business at Nicholas Applegate — a growth manager that has a bottom up stock selection approach — says: “Our style was clearly out of favour but if you look at the performance of the last three months of the year it shows growth managers are returning. We are recording 9.2 per cent and are ranked sixth.”
Meanwhile, performances over a five-year period are far less clear. Marvin & Palmer came out best with a return of 27.6 per cent followed by value manager Platinum Asset Management with 26.3 per cent and Capital International with 23 per cent.
