Equity Investment Style provides advisers with the ability to examine funds in greater detail and relates to the investment style that may prevail in the management of each fund.
Blend – A fund that is not limited by growth or value disciplines. Managers of blended funds may try to adapt their portfolios over the market cycle. Their portfolios may display growth or value characteristics, or a blend of both, at any particular point in time according to the manager’s assessment of the underlying stocks and the prevailing market environment.
Growth Bias – A portfolio which emphasises the earnings growth potential of stocks. A growth company will typically demonstrate higher than average growth in sales and earnings and the ability to generate rates of return in excess of its cost of capital. It is therefore able to retain a high proportion of earnings, which grow faster than average when compared to their peers. Where there is consideration to value, the managers may moderate a growth approach by having regard to relative prices: this frequently referred to as GARP (growth at a reasonable price).
Value Bias – A portfolio which emphasises the value of stocks relative to their peers and their own price history. These stocks typically appear undervalued for reasons besides earnings growth potential. Such stocks are usually identified by their high dividend yield, low price/earnings ratio or low price/book value ratio. Value managers may be “contrarian” in terms of approach – i.e. they may look to invest in lowly-valued stocks at times when such stocks are out of favour.