Value investing has become increasingly irrelevant thanks to central banks and technology, according to AB Bernstein.
The long period of low interest rates is the first culprit to blame for the demise of value investing, according to AB Bernstein.
Technology has disrupted industries in a way that may permanently destroy "moats" that used to exist around certain industries, the analyst said.Brendan McDermid | ReutersThe classic factor investing strategy of picking stocks with cheap book valuation, embraced by the legendary, has become increasingly irrelevant thanks to central banks and technology, according to AB Bernstein.
"Duration has been bid up as rates are so low," Inigo Fraser-Jenkins, Bernstein's head of European quantitative strategy, said in a note on Wednesday. "Thus, the outperformance of value might require higher interest rates, which could be structurally difficult to achieve in the foreseeable future. In this sense one could say that QE could have stopped the mean-reversion process that usually occurs over the economic cycle.
Value investors also got burned by the massive rotation to growth stocks as appetite for fast-growing companies like tech surged. The trend favoring growth over value still persist in recent years as value names have underperfomed in the past five years.
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