Market Leaders Value Composite Celebrates 20th Anniversary

By O'Shaughnessy Asset Management
April 2022

Market Leaders Value celebrated two important milestones late last year. In November, the strategy reached its 25th anniversary and the composite marked its 20th anniversary in December.1

These are significant landmarks in the history of any investment approach and we wanted to take this opportunity both to thank our clients – many of whom have invested alongside us for several years – and to review the results it has generated for investors.

Analysis of the composite’s returns since its launch shows Market Leaders Value has successfully navigated the various equity market ups and downs of the past 20 years, delivering consistent outperformance over both its index and peer group.

MARKET-LEADING RETURNS

The table below will be familiar to our longstanding clients. It is among our preferred ways of presenting performance because it captures both the extent of a strategy’s excess returns and the consistency of those returns over time.

Market Leaders Value Composite: Base Rates of Outperformance Since Inception

Source: OSAM. Data as of 31 December 2021. Inception date 12/1/01. Benchmark is the Russell 1000 Value Index.

The degree of outperformance for the Market Leaders Value composite has been high across both long and short time periods, and the consistency of outperformance has steadily risen with investment horizon. This is evident in the column marked “Base Rate”, which measures how often the strategy has beaten its benchmark over different periods of time.

For example, the 20-year track record of the composite has encompassed 230 monthly 1-year periods (“Periods”, in the table). It has outperformed (“Won”) in 137 and underperformed (“Lost”) in 93 of these, for a 1-year base rate of 60%. By contrast, there have been 182 5-year periods since the composite’s inception and a client who invested for 5 years would have had an 87% chance of outperformance. Over 10- and 15-year periods, the base rate is 100%.

PEER-BEATING PERFORMANCE

These consistent excess returns have been achieved during a period of high-profile underperformance by active managers in general. Reviewing Market Leaders Value’s peer group ranking through time emphasizes this point. No strategy performs well all the time as you can see in the three and five year peer ranking chart, but since composite inception, its lifetime excess returns have remained in the top quartile of its category, and for the past 13 years, they’ve been in the top decile. 

Market Leaders Value: Peer Group Ranking Over Different Time Periods

Source: OSAM, eVestment. Data as of 31 December 2021. Inception date December 2001. Since Inception peer group ranking based on Since Inception excess return each year since the composite inception date.

FOCUSED ON LONG TERM SUCCESS

We launched Market Leaders Value with a clear conviction. By investing in companies with characteristics consistently associated with long-term success, and by having the discipline to stick to this approach, we could outperform the market over time, regardless of its temporary fads and fluctuations.

More than two decades on, fads and fluctuations have remained a feature of stock markets; however, so, too, has the power of disciplined, research-oriented equity investing. In this respect, we expect the next two decades won’t look too different to the last.

Again, we thank you for your investment, and look forward to partnering with you in the years to come.


FOOTNOTES

1 The O’Shaughnessy Market Leaders Value strategy was launched in November 1996 by O’Shaughnessy Capital Management. The O’Shaughnessy Market Leaders Value composite – the foundation of this analysis – was incepted in December 2001 after the team joined Bear Stearns Asset Management.


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CANVAS® is an interactive web-based investment tool developed by O’Shaughnessy Asset Management, L.L.C. (“OSAM”) that permits an investment professional (generally a registered investment advisor or a sophisticated investor) to select a desired investment strategy for the professional’s client. At all times, the investment professional, and not OSAM, is responsible for determining the initial and ongoing suitability of any investment strategy for the investment professional’s underlying client. The professional’s client shall not rely on OSAM for any such initial or subsequent review or determination. Rather, to the contrary, at all times the professional shall remain exclusively responsible for same. See more about CANVAS below and Release and Hold Harmless at the end of this Important Disclosure Information.

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CANVAS® is an interactive web-based investment tool developed by O’Shaughnessy Asset Management, L.L.C. (“OSAM”) that permits an investment professional (generally a registered investment advisor or a sophisticated investor) to select a desired investment strategy (the “Strategy”) for the professional’s client. At all times, the investment professional, and not OSAM, is responsible maintaining the initial and ongoing relationship with the underlying client and rendering individualized investment advice to the client. In addition, the investment professional and not OSAM, is exclusively responsible for:

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