Value investments have outperformed their growth counterparts in the Australian market over the last ten years, contrasting to the rest of the world where the opposite has occurred.
The ten-year annualised returns of the MSCI Australia Value index to the end of last quarter have beaten those of the MSCI Australia Growth index by 2.28 per cent.
It should be noted however, that across more recent time frames growth has beaten value. While the two were on par over the last five years’ annualised returns, at 10.07 and 10.06 per cent respectively, in the last year growth outperformed value by 12.82 per cent.
The rest of the world has seen the opposite trend occur, with the MSCI World Growth index consistently exceeding the returns of its value equivalent. It beat the value index by 1.72 per cent in annualised returns over ten years to the end of last quarter, 2.06 per cent over five years and 2.58 per cent over three years.
Growth beat value by a huge 9.75 per cent over the last year as well.
AMP chief economist, Shane Oliver pointed to a combination of Australia having more high dividend-paying shares (which tend to be seen as ‘value’) than most global markets and a relatively low number of tech stocks (which are often seen as ‘growth’) as a key cause of this outcome.
“The end result is that the high yield and low tech bias of the Australia market imparts a growth bias and investors tend to come here (or in the case of Australian investors, stay here) for yield plays and hence value relative to global shares which are seen as offering growth,” he said.
Oliver said that this had been accentuated over the last decade because Australia’s high-yielding banks had attracted a lot of interest as they performed better than their lower-yielding global counterparts following the Global Financial Crisis.
He believed that the value market in Australia was likely to remain a strong choice for investors seeking high yields.
“If investors are after income (or yield which is often a proxy for value) then Australia is the place to be but if they want growth then there are better opportunities globally. I tend to think that this is likely to remain the case.”
Oliver pointed to the fact that even big resources stocks in Australia have now moved into paying good dividends, making them more of a value play, as proof of this.
