About Sara Yuan

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So far Sara Yuan has created 11 blog entries.

It’s not too late

In November we identified a possible turning point in the under-performance of value, based on a sharp spike in the volatility of the Asia-Pacific Value/ Growth ratio, which resembled a similar event in the year 2000. The previous occasion marked the start of a long period of value out-performance.

This is important because a repeat outcome this time should be very positive for RV strategies, which naturally have a long value factor bias.

The key driver back in November was the emergence of data pointing to higher inflation. Inflation is typically negative for growth relative to value, as growth stocks are long-duration assets which are naturally more exposed to long-term rates.

Since November, the performance of Metrica’s relative value strategies has been consistently positive, suggesting that the turning point thesis is valid.

So now that we are in August, a frequent question from investors is: is it too late to take advantage of this trend?

We don’t think so for the following reasons:

(more…)

By |2021-08-26T10:06:18+08:004 August 2021|Thought leadership|

A tailwind from dispersion

The main success factor for a relative value strategy is the absolute level of spreads, and as discussed extensively in recent newsletters, the narrowing of value spreads which started in November 2020 is still intact and contributing positively to performance.

A secondary success factor is a high level of dispersion, or the degree to which individual names within the spread universe are moving independently. This is because dispersion helps to mitigate the impact of the inevitable periods of overall spread widening which occur from time to time. It allows rotation out of names which are narrowing against the trend, and into other names which are widening. (more…)

By |2021-07-13T15:01:07+08:005 July 2021|Thought leadership|

The outlier rejoins the pack

We have been writing for some time about the bottoming-out of the value factor which started in November 2020.

This trend has been observed globally and among the various markets of the Asia-Pacific region.

However, one market had been notably absent from the trend: (more…)

By |2021-06-29T16:07:33+08:003 June 2021|Thought leadership|

Implications of bear steepening

Interest rates are in focus, with long-term Treasury yields rising steadily, the curve steepening and implied volatility moving higher.

We have previously considered the effect of these trends on equity relative value performance. How about the impact on corporate merger activity? (more…)

By |2021-03-12T11:51:08+08:004 March 2021|Thought leadership|

Holding the floor

We have recently written about the potential turning point for Value versus Growth which occurred in mid-November.

To recap, we identified a sharp spike in the volatility of the Value / Growth ratio as resembling a similar event in the year 2000, which at that time marked the start of a long period of Value out-performance.

What do we need for the turning point thesis to hold? (more…)

By |2021-02-24T16:36:34+08:003 February 2021|Thought leadership|

Why are volatility spikes significant?

In our last post we highlighted a volatility spike in the Value / Growth ratio as a potential sign that the multi-year under-performance of Value might be coming to an end.

More specifically, we looked at the 10-day volatility of the MSCI Asia-Pacific ex-Japan Value index divided by MSCI Asia-Pacific ex-Japan Growth index, which in November spiked to 30 for the first time in twenty years.

The last time this happened marked the start of a long period of Value outperformance.

Volatility spikes are often associated with market turning points. Why? (more…)

By |2021-02-24T16:36:52+08:006 January 2021|Thought leadership|

A turning point?

We may finally have seen a turning point in the under-performance of Value.

The volatility of the Value / Growth ratio in Asia-Pacific surged to 30% on 6 November. The last time we saw a similar level was just over twenty years ago, on 10 April 2000:

This is significant because (more…)

By |2021-02-24T16:37:31+08:003 December 2020|Thought leadership|

Worst performance of value since 1926

We continue to have a strong conviction in a strategy of buying companies at 80-90% discount to NAV, with an expectation of a catalyst for value realisation.

While over the long-term this has proven to be a very effective strategy, it has performed poorly over the past year.

What could be the cause? We believe the global underperformance of the value factor is the main culprit.

We have previously illustrated this using benchmarks from MSCI and Russell Investments. However, to show just how extreme the current moves are, (more…)

By |2021-02-24T16:39:02+08:004 November 2020|Thought leadership|
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