A Value Fund invests in stocks that appear undervalued relative to their intrinsic worth — buying companies that are temporarily ignored or cheap by market metrics.
Value investing is the strategy of buying companies whose stock prices are lower than the fund manager believes their true worth to be. Value fund managers look for stocks with low price-to-earnings (P/E) ratios, low price-to-book (P/B) values, high dividend yields, or stocks of companies going through temporary difficulties that the market is over-penalising. The premise: the market will eventually recognise the true value, and the stock price will rise to reflect it.
A value fund manager is like a bargain hunter who buys quality goods when they're on sale. If a great company's stock is beaten down due to a temporary bad quarter, fear, or market panic — the value investor buys it cheaply and waits for the price to recover. It requires patience: 'value traps' (stocks that are cheap for good reason and stay cheap) are a real risk, and value strategies can underperform for years before outperforming.
Must invest ≥65% in equity following a value investment strategy.
Managers screen for low valuations, high free cash flow, strong balance sheets.
Value strategies often underperform in momentum-driven bull markets and outperform in recovery phases.
Patience horizon of 5–7+ years is typically needed for value to play out.