Value versus growth is an extinct concept, says Allianz’s Minn

ZURICH: The day of picking value managers or growth managers is over, with more clients seeking blended approaches due to a growing disillusion with the style-driven models, Allianz RCM’s Seung Minn has said.

Speaking at the Fonds ’12 conference in Zurich, the Citywire A-rated manager said a number of ‘big US institutional clients’ have become disenchanted with selecting managers based around one of two polemic management styles.

Minn, who manages the Allianz RCM US Equity fund, said the concepts have, in some cases, become misleading blanket descriptions for management styles.

‘In growth and value investing you are really just sector investing,’ he said. ‘If you are a growth investor than you are only really looking at things like tech stocks, while value investors are always going to be overweight in financials.’

‘If you think about it many investors have very short horizons, of around three years, and if they are looking for growth trends or value trends then they could constantly be looking for the right timing [for those approaches] and do very badly.’

Minn said, in the case of US institutional investors, they had previously used around 50 managers with a rough fifty fifty split between value and growth managers. However, he said, this practice is being eroded.

‘More and more they are moving towards the centre. Where they would have had 20 managers or so doing growth and the same number doing value, now they have 10 following a more blended approach. This is because they have had a lot of underperformance from these styles.’

Speaking to Citywire Global, Minn added institutional investors are also showing a greater appetite for alternatives, with private equity and real estate among the favoured areas of investment.

Discussing the US equity market, Minn said there was a strong case for avoiding small cap stocks as the asset class tended to only follow through to real returns in a small number of cases.

‘If you are going to invest in any US funds you can see you are going to need some small cap funds [due to the benchmark] but we would argue you are better off allocating a sizeable portion of your fund to the mid-caps.’

Over the past five years, the $295 million Allianz RCM US Equity fund has returned 7.7% while the S&P 500 TR has risen by 1.7% in US dollar terms.