The contrarian approach hasn’t been successful in recent years, partly because assets in developing countries continued to decline. The $20 billion All Asset Fund lost 11 percent over the past year through Feb. 23, compared with a decline of about 7 percent in the Standard & Poor’s 500 Index on a total return basis.
Brightman said in the post that the recent underperformance of value-oriented stocks has been unusual.
Value stocks have lagged their growth-focused peers by more than 5 percent annually over the past three years through 2015, a rare occurrence since 1997, according to Brightman. When it did happen, the relatively cheaper value companies returned 6.7 percent more than growth equities annually in the following three years.
This history demonstrates that asset prices tend to converge to their long-term average, a strategy his company pursues, Brightman said.
“It is a manifestation of a core tenet of our investment philosophy: the largest and most persistent active investment opportunity is long-horizon mean reversion,” he wrote.