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These Allocators Say They Are Sticking With Value Managers

More than three-quarters of corporate pension and healthcare investors polled by NEPC had no plans to change their exposure to value strategies.

Value managers have underperformed for over a decade — a trend that has only intensified during the coronavirus pandemic and run up to the U.S. presidential election. But they can count on at least one group of asset owners to stay committed to value strategies: private-sector pensions.

Corporate and health care retirement plan investors surveyed by consulting firm NEPC have largely reported that they would maintain their current exposures to value stocks. The poll took place in September, a month when the Standard & Poor’s 500 value index fell almost 4 percent.

Just under three-quarters of corporate pension investors said they would not reduce or increase allocations to value managers, as did 80 percent of healthcare plan respondents. 

Of the 19 percent of investors who were considering changes to their value exposure, just 7 percent planned on cutting allocations to value managers. Nearly twice as many — 12 percent — wanted to rebalance from growth managers into value strategies.

[II Deep Dive: Why Value Investing Sucks]

Fund flows, however, suggest that even if private-sector pensions are sticking with value strategies, many other institutional allocators are not.

Data firm eVestment reported in August that value strategies were among the biggest drivers of institutional outflows in the second quarter. Large-cap U.S. value strategies had net outflows of more than $10 billion, while global large-cap growth funds took in just under $10 billion.

The “drought” in value has even caused at least one prominent value firm to close: AJO Partners co-CEO Ted Aronson told clients earlier this month that he was shutting down the 37-year-old firm, which had fallen to $10 billion in assets from $18 billion earlier in the year.

Still, the eVestment report suggests that institutional investors and consultants are keeping a close eye on value strategies. The data firm said that U.S. large-cap and small-cap value strategies were among the three most viewed U.S. strategies among consultants using the eVestment platform. Domestic large-cap value funds similarly ranked among the strategies most viewed by U.S. investors.

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