STEPHEN CRANSTON: Quality, value or neither?
You will often find that there is no value in quality and no quality in value
Investors have to take note of the strong performance of passive funds. Last year, the Satrix Momentum and Quality funds were the best performers in the unit trust industry. That isn’t necessarily a signal to buy — many would consider it a signal to sell. But there has been far wider scope for passive portfolio construction since smart beta funds were introduced. There is no doubt that an old-fashioned market cap-based index product is quite a blunt instrument. Share prices only loosely reflect companies’ economic footprints, and correcting this is the main aim of the most famous smart beta product, the Research Affiliates fundamental index (Rafi). I was lucky enough to speak to its godfather, Rob Arnott, founder of Research Affiliates. Official Rafi products have gathered US$170bn, and imitation, or bootleg, products a further $50bn. Arnott spoke to me from his office in Newport Beach, California, which you can imagine is something of a hardship post. I can’t be sure he wasn’t on a...
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