Launching a fund in the ‘darkest hour’

Maple-Brown Abbott has stood behind its decision to launch a second Australian value fund earlier this year, despite it being the “darkest hour” for value managers.

The Australian Value Opportunities fund was launched in April 2021 and was a high conviction Australian equity all-cap fund.

Speaking to Money Management, Dougal Maple-Brown, head of Australian equities, said the COVID-19 period had been a tough time.

“When COVID-19 hit, we thought this might be our moment but things went even lower. Normally value does well in a crisis but it didn’t turn out this way and we were in trouble and still underperforming which was painful. It was a terrible time.”

Nevertheless, the firm still went ahead with the launch of the Australian Value Opportunities fund, which had been seeded in July 2020.

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“It was the darkest hour but we knew this was the time to do it. We seeded it in July 2020 and COVID was improving, value had started rallying including banks and deep cyclicals which played into the fund’s strategy,” he said.

“It is a high conviction fund so is not for the fainthearted, when value is doing well then it will do better than our other fund [Australian Share] but then when value goes down then so will the fund.”

He said it had been helped by banks, insurers, resources names (excluding iron ore), and mid-cap takeovers.

Asked what would be an ideal environment for value funds in 2022, Maple-Brown said an improvement in global growth and a sensible rise in interest rates. The reason value had been underperforming over the last decade was the global move to low interest rates.

“Value is the only non-correlated asset class to interest rates so if rates go the other way, it will be hard to find protection in a rising interest rate environment. Bond funds won’t give much protection and most other asset classes will struggle.”