Evolution of the MSCI World Value Index/MSCI World Index/MSCI World Growth index in EUR in 2021. Source Bloomberg
In the chart above we can see how in 2021 the MSCI Value Index (+31.9%) has outperformed the general index (+31.4%) by 0.5% and has outperformed the MSCI World Growth Index (30.4%) by 1.5%. This moderately better performance is a positive change in trend for this factor, after many years of poor performance.
Evolution of the MSCI World Value Index/MSCI World Index/MSCI World Growth index in EUR from 2000 to 2021 (left) and from 2010 to 2021 (right). Source Bloomberg
As we can see in the graph above, this may be a change of trend after many years of the opposite:
From 2000 to 2021, the MSCI Growth (7.2% APR) has clearly outperformed the MSCI Value (5.3% APR) by 1.9% APR
From 2010 to 2021, the MSCI Growth Index has outperformed the MSCI Value Index by an impressive 5.1% APR .
On another occasion we already remembered that
“Nobel laureate Eugene Fama and researcher Kenneth French, former professors at the University of Chicago Booth School of Business, attempted to better measure market returns and, through their research, identified that value stocks outperform growth stocks over the long term.”
But this clearly, as we have seen, has not happened for many years. That is why some see in what happened in 2021 a possible change of trend for value investing. The explanation would be, apart from the already known reversion to the mean , that the potential interest rate increases expected for 2022 would harm Growth stocks and favour Value companies .
ETF Portfolios
Our Value indexed portfolios have performed very well in 2021
Our value ETF indexed portfolios have also performed relatively better than standard ETF portfolios during 2021 as seen in the chart below:
Value vs. standard indexed portfolios
Prepared by the authors with data from Bloomberg
On average, the inbestMe indexed value portfolios have had a return of 10.5% vs. 9.7%, or 0.8% more .
It is especially in the higher profiles where this difference is chinese overseas europe database most evident, with Value portfolios exceeding standard portfolios by 2 to 3 percentage points.
Our Value indexed portfolios continue to outperform Value funds
As we anticipated in March 2021, the value funds that we have been following in our recurring reports have performed very well during 2021, some of them recovering strongly from previous years.
inbestMe ETFS Value vs Value Funds
Prepared by the authors with data from Bloomberg
In the chart above we compare, as we have been doing periodically, the APRs of the selected author funds and our inbestMe Value portfolios. We now extend this analysis from 1/1/2018 (the year our inbestMe Value portfolios were launched) to 31/12/2021.
Despite the large recoveries of some of these funds during 2021, we clearly see in the chart above that our Value indexed portfolios have an excellent relative performance compared to the author funds, clearly beating all of them during these 4 years.
Results of our portfolio
More specifically, our inbestMe Value 8 portfolio achieves an APR of 6.3%, surpassing in:
11.8 percentage points to Cobas Internacional FI (APR -5.5%)
1.8 percentage points to Bestinver Internacional FI (APR 4.5%)
1.3 percentage points to Azvalor Internacional FI (APR 5.0%)
To date, in our previous comparisons we have been cautious in the relative valuation of our portfolios due to the short time span.
But now we can start to be more forceful and say that for those who want to continue investing in value, our indexed Value portfolios are a great alternative that have clearly outperformed author Value funds in the last 4 years and will most likely continue to do so thanks to the power of indexing.
The differences in cumulative profitability compared to author value funds, over time, are already very significant as we can see in the following graph:
Prepared by the authors with data from Bloomberg
ETFs Investment Guide
As we can see in the graph above, our inbestMe Value 8 portfolio has obtained an accumulated return of 27.5%, outperforming in:
47.8 percentage points to Cobas Internacional FI (cumulatively -20.3%)
8.3 percentage points to Bestinver Internacional FI (accumulate 19.2)
6 percentage points to Azvalor Internacional FI (21.5%)
To these differences we would have to add almost 4 percentage points more if we were to make the comparison with the inbestMe Value 10 portfolio.
Our Value indexed portfolios are much more efficient than Value funds
As we have consistently reported, beyond the profitability of an investment, we must take into account the risk.
If we look at the volatility (risk measure) of all the author Value funds that have served as a reference in our recurring reports on the subject in the following graph , these have a much higher volatility (read more risk) than our inbestMe Value portfolios profile 8.
Prepared by the authors with data from Bloomberg
In the graph above we see how inbestMe value 8 stands out as the least volatile portfolio in the last 4 years with 13.6%.
The next least volatile Value fund, by a long way, is Bestinver Internacional FI with 19.3%, the other two clearly exceed 20% with 22.3% for Azavalor Internacional FI , and 23.8% for Cobas Internacional FI .
Prepared by the authors with data from Bloomberg
In the chart above where we show the Sharpe ratios , we see how the inbestMe Value portfolios stand out clearly with a ratio of 0.62 . The Azvalor Internacional FI and Bestinver Internacional FI funds follow them but with figures below 0.5. The Cobas Internacional FI is far behind with 0.07, indicating that it provides practically no return per unit of risk.
We have seen that our inbestMe Value portfolios are not only more profitable, but are also clearly more efficient in terms of risk-corrected returns (or Sharpe ratio).
Conclusions
A value investor does not have to take such excessive risks as those we have observed in some cases following the fashionable value manager.
There is a chance that the Value fund will do well for one year, two years, or over a specific period of time, but it will be difficult for it to do consistently better than the index over the medium or long term, like any other active management fund .
And if it does so, it is likely that along the way it will take, as we have seen and especially in this type of fund, greater risks due to specific bets on certain companies or sectors.