Half of the former top quartile of European equity managers have slipped below the median in the past three years, analysis from Fitch Ratings shows.
A special report by the ratings agency highlights the need for equity portfolio to adapt their stock-picking process to changing market conditions.
Fitch says, for example, that half of the top quartile of European equity fund managers between 2005 and 2008 are now below the median in the past three years.
"Most of the equity managers with solid performances between 2001 and 2008 had favoured value-oriented stock-picking,” says Aymeric Poizot, managing director in Fitch's fund and asset manager rating group.
“Since 2007, value stocks are structurally underperforming growth stocks."
The report singles out five factors that have had a direct implication for stock-picking: low growth prospects, the sovereign crisis, globalisation, disruptive innovation and mass trading.
Growth at reasonable price or value strategies need to be “reinvented”, Fitch says.
The majority of fund managers claim to have a bottom-up stock selection process, but Fitch says equity portfolio managers will have to manage the top down, update their stock selection criteria or think beyond blue chips indices.
In a world driven by macro events, stock-pickers cannot avoid thematic, sector and country views when it comes to identifying growth opportunities and avoiding value traps.
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