“Value is a philosophy, not a factor,” according to Bill Lipsey, president and head of distribution for New York-based global equities manager Pzena Investment Management. He visited Australia last week for the launch of the firm’s new fund, the ‘Pzena Global Focused Value Fund’.
“There are really only two ways to invest,” he says. “Value and momentum. You ask about ‘quality’. What is that? What is ‘growth’ if not momentum? Real value investing is about applying judgement. At some level a lot of what we call ‘factors’ are highly correlated.”
That sounds almost like heresy in an investment world which has gone crazy for factors – partly because the smart-beta strategies on which they are based are cheap and partly because they actually work, most of the time. But, as Lipsey would say, not always.
The new unit trust is based on Pzena’s flagship global equities strategy. It widens the investor reach in Australia and New Zealand, with a minimum investment of just A$20,000. The strategy has returned an annualised 5.9 per cent, in US dollars, since inception in 2004.
While value has been through a rough time for much of the past decade, in the current climate, where the global markets are being driven by a handful of technology-orientated mega-names, even momentum managers are worried about the immediate future. Maybe it’s time for value to shine once again as it has done for more than 100 years.
The Australian offices for Pzena were the first outside of the US, established more than 10 years ago. David Taylor, director of business development and client service, is based in Melbourne and the more recent recruit, Paul Whymper-Williams, is based in Sydney. They travel to New Zealand as often as they can. Lipsey likes to visit as often as he can, too. His son is studying at the University of New South Wales.
The new fund complements Pzena’s Australian-domiciled emerging markets equities fund, launched in 2016. That strategy on which it is based has returned an annualised 13.4 per cent since 2015 in US dollar terms. For Australian unhedged are investors the numbers are 11.4 per cent over 10 years and 16.1 per cent over seven years.
David Taylor said last Friday (January 31) that the new global focused fund had made its first investment in the past week. Paul Whymper-Williams said it would be targeting high net worth investors, family offices, smaller super funds and wealth advisory groups in Australia and New Zealand.
Taylor said: “The new fund is a logical extension of the A$5 billion of institutional mandates Pzena manages for clients in Australia and New Zealand, demonstrating that the firm is committed to offering its services and skills to a broader range of investors.”
Both of the Australian-domiciled funds exclude tobacco and ‘cluster-bomb’ manufacturers from their portfolios. Equity Trustees is the RE for both the new fund and the emerging markets one.
Bill Lipsey says: “It feels pretty good doing what we’re doing right now… You don’t need to take extreme risks to get high value. What people are buying right now is almost as high [in valuations] as it was in the internet bubble.”