STEPHEN CRANSTON: Quality is difficult to pin down when buying shares
There is consensus in constructing a value index, but there is a much wider range of quality attributes to consider
“Quality is remembered long after price is forgotten”, was the tagline of one of the luxury cosmetics houses when I was growing up in the 1970s. Not that a fund manager who had overpaid for shares could get away with such a sentiment. Price of entry into shares is probably the most important consideration when it comes to achieving long-term returns.
This explains why the value management style generates the most airtime. In comparison there are very few clear definitions of quality fund management. Most trustees when they meet a shop’s quality team think they are meeting their A team, so when the value, core and momentum teams pitch they are perceived to be the lower-grade talent. More seriously, quality has tended to replace “growth” as the style that is the exact opposite of value, or at least the two styles have a very low correlation...
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