25 years of insights into Contrarian Value Investing

25 years of insights into Contrarian Value Investing

By Nedgroup Investments, 01 Jan 2019

The Nedgroup Investments Global Flexible Fund (sub-advised by First Pacific Advisors) was  awarded a Gold analyst rating by Morningstar as well as a number of other awards* in 2018. To add to the accolades, in June 2018 FPA celebrated 25 years of success at managing the Contrarian Value Strategy and delivering superior long-term performance to their clients.

Steven Romick, Managing Partner at FPA and portfolio manager of the Nedgroup Investments Global Flexible Fund penned the below note to investors which highlights some of the companies milestones. 

FPA CRESCENT FUND CELEBRATES 25 YEARS  

The FPA Crescent Fund (FPACX) celebrated its 25-year anniversary [in June 2018]. With its unfettered mandate, the management team has maintained the same philosophy and flexible approach that existed at the Fund’s inception. We have been fortunate over the past 25 years to have achieved our Fund’s objective of equity-like returns over the long-term, while taking less risk than the market and avoiding permanent impairment of capital.

While we acknowledge the significance of a quarter century behind us, we also appreciate that recent years have not been friendly to the practitioner of value investing. If the U.S. does not find itself in a bear market by the fourth quarter, this bull market that began in March of 2009 will officially be the longest on record.1 In addition, value stocks have underperformed growth stocks in 94% of the rolling five-year periods since March 2004 – and not by a little, but by more than an average of two percent annualized in each period.2

FPA Crescent has delivered on its objective even in the current market cycle despite such headwinds.3 Nevertheless, we look forward to (but do not forecast) when global markets will inevitably provide more opportunities as a result of bad news and/or fear.

We appreciate and thank our long-standing shareholders who by holding steadfast through the market’s vacillations have been able to achieve returns (their dollar-weighted return4) in line with that of Crescent's time-weighted returns, which is unusual in our industry.

The challenges of a consistent team delivering successfully over time is reflected in the following:

Differentiated Performance Across Multiple Market Cycles5

Contrarian value investing for 25 years

although nice to periodically reflect on past success, it will do us no good to rest on it. We look forward to continuing to deliver on our objective in the years ahead, and celebrating more milestones. In the interim, the team has readied itself for what lies ahead.

Nedgroup Investments Note:  

The Nedgroup Investments Global Flexible Fund has been sub-advised by First Pacific Advisors (FPA) since June 2013, as part of our Best of Breed Investment strategy, where we partner with select asset managers who are experts in their field of specialisation to deliver superior long-term performance for our clients. 

The Nedgroup Investments Global Flexible Fund is modelled on FPA’s Contrarian Value Strategy and mirrors FPA’s flagship fund - the FPA Crescent Fund, in terms of investment process and philosophy although some differences exist due to the different regulatory regimes in which the funds operate.

*Best Fund over 3 Years: Mixed Asset US Balanced Global category – Lipper Awards 2017; Best Fund over 5 Years: Mixed Asset US Balanced Global category – Lipper Awards 2017; Best Offshore Global Asset Allocation Fund on a risk-adjusted basis over five years –Raging Bull Awards 2016

1 Since the 1920s 

2 Russell 1000 Value vs. Russell 1000 Growth 

3 Current market cycle: 10/10/2007 – 3/31/18 

4 https://corporate.morningstar.com/us/documents/PR/Investorreturnsfactsheet.pdf

5 Peers = funds in Morningstar large growth, large value, large blend, 50-70%, or world allocation categories. Past performance is no guarantee of future results. 

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