One of the big issues for investors is what style of equity fund should they invest in, growth or value?
Different styles have proved a conundrum for investors as for more than five years growth has experienced unprecedented growth, then in mid-2000 the greatest growth period in history came to an end and value became the 'in' style.
During growth's time it outperformed value by up more than 20%. Amazingly enough when value was in vogue it outperformed growth by about the same amount.
The difference between the two styles has been highlighted in the recent Fund Manager of the Year Awards. Two value managers, Bank of New Zealand and Tower Asset Management scooped first and third places overall because their way of doing things was in vogue.
However, both managers had seriously suffered in recent years because of their style bias, and questions had been asked if value was still a relevant discipline.
The good news is two-fold. Yes value is still relevant, and the experts are predicting that the discrepancies between value and growth are likely to become less pronounced.
Dresdner chief investment officer Mark Phelps, who was in New Zealand with Guardian Trust Funds Management recently, admits it's been a tough year for growth managers.
"Growth has not been the place to invest in 2000," he says. "Growth companies have become very expensive."
His view is that the spread between growth and value will become less pronounced.
Consequently, the investment environment will favour managers who take a stock picking approach with their funds.
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