News & Our Thinking

Quarterly Investment Commentary

Growth and Value Investing – Not What but When

10 September 2010

The job of a trustee is extraordinarily demanding because of its many duties. Adding to the complexity of the job is the necessity of evaluating investment managers. Historically, the investment world has been divided into two categories: Growth managers on one side and Value managers on the other. Asset allocation within a mandate was divvied up between the two investment styles and within this bipolar world view, investment sectors were often fixed between Growth and Value. This methodology created an inaccurate evaluation process as only sector exposures were considered, rather than an analysis of the manager’s process.

Warren Buffet once stated that “growth and value are joined at the hip.” This statement is in stark contrast to how many individuals and some consultants view the two investment strategies. The reality is that over an investment cycle the fundamental characteristics of companies and industries rotate between the classic views of Growth and Value. Sector-wide forces as well as firm-specific events change what a company should do to maximize shareholder value. It is that change and subsequent operating environment that establishes a company or sector as Growth or Value. As a trustee, a key to evaluating managers is not to ask what, but rather to ask when.

For more, download the PDF:  Growth and Value Investing – Not What but When.